When expectations aren't fulfilled, expect trouble

The latest Daily Dispatch from Casey Research contains a troubling - and, I fear, all too accurate - article by David Galland about what may happen when government handouts cease.  Here's an excerpt.

There is a parable about a Southern farmer who takes up the challenge of capturing a herd of particularly aggressive feral hogs. The story proceeds with him putting out some food where he knows the hogs will find it. He then continues putting the food out day after day while, at the same time, slowly building a pen around the feeding spot. The story ends with the farmer simply closing the newly constructed gate on the hogs while they are snout-deep in their slops.

If one so desired, however, one could continue the parable as follows…

Some months later, the farmer found himself facing hard financial times and decided he could no longer afford to keep feeding the hogs at the same level. The decision made, the next day he cut back the quantity of their rations and substituted the higher-quality feed he had been dishing out with far less tasty tidbits.

For a few days the hogs waited patiently for their usual rations, but when the farmer failed to come through, the hungry hogs began to fight over the reduced slops provided.

It was not long after that the farmer – confident that the hogs were properly domesticated – let himself into the pen only to find himself surrounded by angry hogs who made him what's for lunch.

The moral to the longer-version story is that the domesticated hogs will remain docile only for as long as you keep them snout-deep in slops.

Which brings me to the riots in Brazil, the latest footnote on the continuum of the slow-motion global financial collapse now underway.

Simply, years of expanding politically motivated social welfare programs around the world have raised the expectations of the masses to the point where they simply can't be met.

The results are that growing segments of the previously submissive masses, seeing their slops reduced in both quantity and quality, are now drifting back towards a more feral state.

. . .

The rapid increase in social spending reflects the unintended consequences of the "chicken in every pot" promises that have become the basis of every election campaign for decades now. This is a picture of what happens when you train the masses to look to the government, and not the free markets, to solve every problem, water every plant, kiss every boo-boo.

Thanks to the surge in socialism, this pattern is mirrored the world over. It's now projected that Italy will need a bailout from the EU within six months – again due to its unfunded and non-payable social obligations.

Since the latest crisis began, we have seen governments around the world "socialize" the bad debts of failing financial institutions by transferring those debts from private balance sheets to those of the governments (and the central banks). This has only exacerbated an already impossible situation, requiring the widespread adoption of global monetary madness.

Seriously, who in their right mind could possibly think creating trillions in new monetary units in order to support virtually unchecked government spending is a sound and sustainable policy?

Yet that's exactly the operating model of the leadership in most of the world's largest economies. I suspect this is so only because they simply don't see any other way to delay the inevitable.

Flash riots in places like Brazil only encourage these governments to continue acting like monetary sluts in order to keep the public slops flowing. And to the extent that it helps even temporarily mollify the expectations of the masses, expect other equally counter-productive measures as well. In the case of Brazil, its government is seriously levying yet another tax on the successful to pay for the social spending being demanded by the rioters.

And the global economy continues to spiral around the drain.

There's more at the link, including some very informative graphs of government expenditure.  Recommended reading.  See also Zero Hedge's enlightening (and infuriating) 'When Work Is Punished: The Tragedy Of America's Welfare State'.  Also highly recommended.

The nub of the problem can be seen very clearly in this graph:

Central government expenditure (including on entitlement programs) has been financed by increasing debt, not increasing tax revenues.  There's an old saying:  "If something can't go on, it won't go on".  That graph illustrates beyond a shadow of doubt that current entitlement spending simply cannot go on much longer.  It's become completely unaffordable and unsustainable.

I believe that when the masses who've become dependent on government handouts find those handouts are no longer available, they may well try to take what they need (or just plain want) from those who have it.  They won't stop to think about whether it's right to do so or not - after all, they're entitled to it!  They've been told that from their earliest conscious moments!  If they're entitled, that means they can take it - and if those who have it won't give it to them, they're the guilty ones!  That's what happened in England two years ago.  I see no reason why it can't happen here.

(The same thing may happen if [as I expect] George Zimmerman is exonerated for the shooting of Trayvon Martin.  There are those who simply won't accept this verdict due to their particular racial, social or cultural prejudices, regardless of the law and/or the facts.  They're already threatening to retaliate against white citizens.)

In either case, keep your powder dry, friends.  I fear you may yet need it.

Peter