During an appearance on Fox Business Network, legendary economist Thomas Sowell said he wouldn’t bet on Americans resisting the siren song of socialism. Adding fuel to the fire, economist Peter Schiff warned his podcast audience recently that the U.S. was borrowing itself broke, adding that a recession was all but guaranteed.
On TV, Schiff also warned that the coming financial crisis would usher in socialism.
But as the Federal Reserve signals it may mess around with the balance sheets and interest rates once again to keep the economy from collapsing, the public still seems blissfully unaware of the gravity of the coming crisis. As we learn that Americans’ net worth has fallen to levels only seen during the 2008 financial crisis, the public might finally begin to worry about the future. If only to pressure elected officials to stop meddling with the economy. But then maybe, things might get even worse and we’ll see a complete change in the overall mood.
With the economy in disarray, socialist and socialism-friendly politicians could gain significant ground in the coming years, or even months. And in 2020, we could see President Donald Trump losing to someone like Sen. Bernie Sanders.
“So many people today, including in the leading universities, don’t pay much attention to evidence,” Sowell said. “When you see people starving in Venezuela and fleeing into neighboring countries and realize that this is a country that once had the world’s largest oil reserves, you realize that they’ve ruined a very good prospect with ideas that sounded good but didn’t turn out well.”
This transformation of the Venezuelan economy has been on the make since 1999, when President Hugo Chavez promised to snuff out imperialism and inequality, all through the implementation of a heavily planned, state-run economy.
By banking on people’s anger toward a government that had been inflating the currency and therefore destroying the purchasing power of the Venezuelan bolivar, Chavez promised things were going to be better. But under his and his protege’s rule, monetary inflation skyrocketed. With the price hikes that followed, the nation went into crisis. President Nicolas Maduro responded by freezing prices and ordering six minimum wage hikes during 2018. But despite all these policies, things only got worse.
As millions of Venezuelans flee due to hunger and flat-out despair, U.S. lawmakers like Rep. Alexandria Ocasio-Cortez suggest just “printing more money” to pay for their policies. They fail to see how this type of policy would lead to the disaster we’re seeing in Venezuela, and will often argue that having a planned economy isn’t that big of a deal.
But it is precisely this careless approach to monetary policy that has brought us to the mess we’re about to experience.
As the Fed announces that Americans’ net worth dropped “to $104.3 trillion as the year came to an end, a decrease of $3.73 trillion from the third quarter,” we also learn that young people are failing to pay off their debt, even though they continue to sign up for more loans on a whim.
As these very millennials notice they are broke and things are only getting worse, they might undoubtedly listen to people like Cortez and think they have what it takes to make their lives better. The rest, as they say, would be history.
If anything, this is the time for libertarians to sound the alarm on the dangers of giving government more power over the economy.