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Citi Goes Back To The Future: Lessons from U.S. Fiscal Deleveraging After World War II
Just two weeks after the 'Back To The Future'-Day hoax, Citi's Global Head of International Economics Nathan Sheets, provides an excellent compare and contrast discussion of the state of the US post-WWII in relation to the current world - and he is less than sanguine at the prospects.
Nathan Sheets, Citi:
In the years after World War II, the United States achieved a dramatic reduction in the level of the federal government’s debt. The costs of financing the military had pushed the debt up sharply, from around 40 percent of GDP before the War to a peak of nearly 110 percent of GDP as the War ended. But a combination of strong economic growth and remarkably disciplined fiscal policies, as well as elements of socalled financial repression, brought the debt below 50 percent of GDP by the late 1950s. This remarkable episode provides some important perspectives for us today as the debt is again on a high and rising trajectory.
The sharp decline in the public debt after World War II was driven by several factors. The first was a highly disciplined fiscal policy. During this period, a strong social and political consensus prevailed in favor of budgetary restraint and debt reduction. The government’s budget registered sizable surpluses in the late 1940s as military efforts were wound down, and then cycled near balance through the following decade. Notably, government outlays moved up some during the years of the Korean War, but this increase was matched by revenue measures, which allowed the military spending to be financed without additional debt issuance.
The strong growth of U.S. real GDP in the years after World War II was a second factor that contributed to reducing the government’s debt burden. The U.S. economy initially contracted in 1946 and 1947 in the face of a sharp scaling back of military spending, prompting concerns about the possibility of sustained recession and rising unemployment. But the economy was rapidly transformed into peace-time production, with strong consumer demand (which had been pent-up through the Depression and the War) quickly taking hold. Demographics were also favorable, as the returning GIs married and the baby boom ensued. From the late-1940s through the late-1950s, annual real GDP growth proceeded at a strong 3¾ percent pace.
U.S. fiscal deleveraging during this period was also supported by some less benign factors. During the War years, the Federal Reserve pegged long-term interest rates at very low levels in an effort to minimize the government’s debt-service burdens. To ensure that the accommodative policy stance did not translate into rising inflation, the government adopted wage and price controls. After the war, as these controls were dismantled, the price level surged upward. All told, consumer price inflation averaged about 6½ percent annually from 1946-51. This, in turn, inflated away a sizable chunk of the government’s debt burden.
Under usual conditions, such a burst of inflation would have quickly driven up borrowing rates. But bowing to pressures from the Treasury, the Federal Reserve continued to cap long-term government bond yields at 2½ percent until the spring of 1951. The upshot was that real interest rates (i.e. adjusted for inflation) were sharply negative during the years following World War II. These negative real interest rates supported the government’s deleveraging objectives, but did so at the expense of those holding the debt.
Carmen Reinhart and various co-authors have termed government policies used to achieve redistribution through such channels “financial repression.” Although financial repression may be achieved using a variety of mechanisms — including by capping interest rates, restricting competition in the financial sector, or introducing capital controls — the common underlying objective is to induce investors to hold government debt at yields lower than would other otherwise be required. As a practical matter, negative real interest rates such as those observed in the United States during the 1940s are a defining feature of financial repression.
The experience with fiscal deleveraging after World War II offers some striking lessons, as well as some important caveats, for the United States in the present episode. Since the global financial crisis erupted in 2007, federal debt held by the public has risen from below 40 percent of GDP to over 70 percent. And the aging of the baby boomers is likely to drive further increases in the years to come if action is not taken to rein in the path of spending relative to revenues. A natural question is whether the United States will be able to defuse these fiscal pressures and, as in the years after World War II, engineer a successful deleveraging. A related question is the extent to which the post-War experience might serve as a useful template for a solution going forward.
As a general statement, the prognosis on this score is not encouraging. Even if the headwinds that are now afflicting U.S. aggregate demand quickly abate, economic growth is unlikely to be as strong as that recorded in the late-1940s and 1950s. At the very least, demographics are less supportive. Similarly, while we cannot dismiss the risk that the Federal Reserve may stumble as it eventually exits from its unconventional policies, a burst of inflation approximating that seen in the late 1940s seems unlikely. The Fed’s commitment to maintaining price stability is underscored by the recently announced 2 percent inflation target. Although the Treasury dominated the Federal Reserve in the late 1940s, understandings of central bank independence have evolved significantly over the past sixty years.
The possibility of financial repression is something of wildcard. Given the current size and sophistication of the financial sector, financial repression is unlikely to be an explicit object of policy; specifically, real interest rates will probably not be maintained at negative levels for the purpose of facilitating the government’s debt financing. But interest rates or increase the relative attractiveness of assets issued by the government.
The following are two examples. First, the Fed’s ongoing Operation Twist has been designed to boost economic activity and avoid deflationary pressures, consistent with the Fed’s dual mandate. However, Twist achieves these objectives by driving down real long-term interest rates and increasing the scarcity (and, hence, the attractiveness) of long-term Treasuries. Second, the Basel rules give government securities a zero risk weight; while this feature is increasingly vulnerable to criticism its primary goal is to provide incentives for institutions to hold safe assets, not to finance the government debt. Whether such policies should be classified as financial repression is very much in the eye of the beholder.
With the other mechanisms that were used to reduce the debt burden after World War II likely to be less powerful in today’s world, fiscal discipline must accordingly be a central feature of the policy mix in the years ahead. Exactly how this should be achieved is more a political than an economic question, with a whole range of possible solutions. The key is to find a path for expenditures and revenues that avoids the so-called “fiscal cliff” in the near term but that firmly reduces the trajectory of the debt over the medium to long run. Without such a solution, we leave ourselves vulnerable to the vagaries of sentiment in the bond market, thus opening the door to an unwelcome set of severe financial risks.
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And what were the tax rates like after WWII again? < crickets >
"Possibility of financial repression?!?!?!!?" LMFAO!!!!!!!!
You say that like you think the government has to pay back the money it borrows.
That kind of talk can only get you in trouble....
Pay back money? No where do I mention treasuries, but as long as you brought it up...
why worry when soon treasury rates will be negative and the debt will be paying for itself. Is this what you mean by "winning"?
Fair enough -- I assumed you were implying that the deleveraging was actually paid for. Mea culpa.
and your 401k will be forced to buy said debt
What 401k? Got physical?
"Possibility of financial repression?!?!?!!?" LMFAO!!!!!!!!
Took my words. +1000
Exactly. Because the only way of winning is not to play.
Shit, you couldn't hardly dig a for a fence post without oil gushing up out of the ground back then either.
That's the unmentioned driver of growth. We grew our wait out of trouble then on the back of cheap oil. Until we find a new source of energy that ain't happening. And unless it's a renewable source of energy, we'll be right back in the same spot (except levered higher) when this new source of energy runs out... Equilibrium seems like a much more sane goal than constant growth to me.
Also the US manufacturing infrastructure was whole. Everyone else was prostrate.
just out of morbid curiousity... do you ever ask the same question about deductions or regulatory costs? do you think changes in the laws regarding deductions are relevant to the discussion? don't you think a better metric for comparison of different periods of time would be percentage of GDP taken by federal, state and local governments? if not, why not?
were you paying taxes prior to reagan's reduction of the federal rates? i was, and i was in a high bracket and i saw virtually no change in my total tax liability and so i know, from personal experience, that to look at rates alone is highly inaccurate at best and bordering on an attempt to intentionally mislead people at worst.
the tax laws are simply another way the rich and powerful use the government to suck surplus production from the productive, into the hands of those with political connections (see GE for instance). by arguing for government to take a higher percentage of GDP you are simply arguing that a greater proportion of the GDP should be redirected those those with the juice to write the lwas to their benefit (like monsanto (whose lobbying strongly influenced the food safety bill), or the pharm and insurance industries (who basically wrote the ACA)). i'm afraid you're being taken for a ride and you don't even know it.
Currently paying around 45% on my income and I remember the 80's. I laugh my ass off when I hear young GOP shills talk about how great Reagan was at "lowering" taxes. Revisionist history is gonna take these young folks for the ride of their life. Most likely they will be sacraficed for the global bankers like their great grandparents were during WWII.
i have given up all hope that people will come to realize that voting for expanded money and power for the government is really just a vote for expanded money and power for those who control government. the rich, well organized and influential control government, have always controlled government since the time of the babylonians and always will control government. a weak and decentralized government is the best and only defense of the common man.
LMFAO, you bet.
Who let this bozo writer out of the nut house. Someone get him a dictionary so he can look up what possibility means.
We need a bozo counter and not just an up/down arrow on these types of posts.
Can't steal from Social Security again. This time we need to steal to fund Social Security. So good luck with the comparison.
They will "rehypothecate" from 401K accounts to fund Social Security.
I've been on ZH for about 2 years, I guess. And that's the way I think now. And I'm not even that cynical, just rational.
We are in seriously deep shit.
Also one reason why I've withdrawn the entirety of my retirement account and no longer contribute, despite contribution matching from my employer... I've got ~40 years til retirement... absolutely, positively, zero chance it's there when I'm ready to retire. If you're a thief in one area of my life, I'll trust you in no area.
I'm just hoping contributions won't become mandatory... (SS v2)
Don't worry, when working till 80 who needs savings for retirement?
This is a good piece. I read it and think to myself, "This is literally a checklist of what our government will not do."
""This is literally a checklist of what our government (fully owned by the financial sector) is already doing." - fixed it for you.
Agreed,, And since long term rates are now "capped" at that 2 1/2 it seems it would be time to get that infation rate up from 2% to about 6%.
I see real inflation (calculated using pre reaganomics) already there.
it's there... gas, rent, utilities, insurance, groceries... it's there.
Absolutely. No way inflation is 2%.
"Similarly, while we cannot dismiss the risk that the Federal Reserve may stumble as it eventually exits from its unconventional policies...."
You mean someone believes the Federal Reserve hasn't already fallen and is unable to get up?
Stumble, like in going bust. They are leveraged 60-1 against their own capital. It wouldn´t really take much to wipe them out. Of course any trading losses would simply be referred to the Treasury but that doesn´t seem like any solution.
The Treasury ultimately has the backing of the US taxpayer. And after that, the US military.
So in a way they can't lose, except that absolutely everyone on the planet also loses.
Of course you can´t lose if you can always refer your losses on someone else and sic the military on those who can´t defend themselves to steal their resources. Problem is, this kind of policy isn´t sustainable. At some point you´ll run into opponents that can both defend themselves and bite you back.
Of course both Wall St. and Washington realize this. It isn´t rocket science. So, you have seen a certain hesitation. So far they´ve refrained from defrauding new wars going and Wall St. has been allowing its "regulators" to disclose part of its fraudulent practices. More will come. As usual it´s a gradual process. The big trend for the next years will be wind back in govt. and finance. It´s a natural correction.
And yet at the same time they are preparing us for war, and also for civil war which is rather chilling.
They could just be hedging their bets, though. That's like them.
We'll see.
I can promise you one thing; they'll follow the money. Whatever profits them, that's where they will take the rest of us.
Well, I happen to think it´s mostly hype. The military and other security forces are an enormous unemployment reservior. To justify this they keep you anticipating doom and brimstone. This also helps keep up the market of extremely overabundant commodities and overissued stocks. Meanwhile number of workers employed in production is at 1940 level. It´s an economy that is 70% based on personal consumption. This mass of consumers has had to absorb increasing mountains of merchandise without the necessary rise in wages. The answer has been credit and corresponding asset bubbles to provide collateral. Now there´s many times more debt than money. It´s a shell game of gigantic proportions. I think the powers that be are getting ready to try winding it down gradually. Presumably substantial spending cuts will hit on Oct. 1, the start of the new fiscal year and then tax hikes in the new year. We will see what we´ll see.
Fire the dad gum lot of them.
It is for the greater good.
I wonder if Bernanke has read this?
Shit, he probably wrote it.
What the fuck is this guy smoking?
Jamie Dimon's ass crack.
Then there was this little gem:
The possibility?!
Or, he could have simply said "We're fucked".
Too neat. Too pat.
Derivatives, anyone?
Almost has that troll fragrance.
Or is that a unicorn fart?
"Fiscal discipline", right. yup. We will get the Democrats, Republicans, Tea Party people, our brilliant administration and the Pentagon all together and within a few days they will all profess the new paradigm, "Fiscal Discipline". Not a problem. Easy and Done.
Give me a freaking break. Never happen until the printing press is taken away from the inmates. And look at these financials. Libor corruption. No one cares. Trading disasters, no one cares. Lying, cheating, hiding losses off of balance sheets, no one cares.... because this is America.
What is this hassle all about this Liebor shit? Compared to what the f**king central banks and governments all over the world do this is "peanuts" (if I may borrow language from an infamous German bankster). Clearly this doesn't make things better - I admit.
in 1949 imports were just 14% of GDP. Made in Japan was a joke. In 2009 imports were 55% of GDP and Made in China is how we get by and they own our sorry fat asses.
we are headed back to 1949. maybe, 1849. i give it maybe 20 years to happen.
Long buggy whips?
I made a wood garden cart last summer, as a prop for a Shakespeare play my kids were in. Scale that up, I'd have a horse cart.
Don't have a horse, but you know what they still breed them.
It's not out of reach at all. Except in our minds.
Breeding farms is what drives our racing industry. Those horses are worth tens of thousands to millions of dollars over a few short years.
The People who enjoy, work with or own these horses don't worry about the little people's problems such as you and me.
How have we financed the "War years" from 2003 to present?
Fiscal discipline? Stop fighting Zionist wars for "Israel" and its control of Middle East wealth.
Been fighting war primarily for the Saudis and the Gulf States. Have been since the Carter Doctrine and it is damn expensive.
Our kids are screwed either way. Their kids too, probably.
sixty years ago the treasury called the shots whereas today the fed rules the roost [agree] -- congress gratuitously gives the fed a portion of its workload as a duel-mandate to fix ump, nice! congress sits backs an becomes virtually a one party system defined only by handouts to their respective constituents ie., welfare votes vis-a-vis corporate financing, where the line in the sand reciprocates with the tide of a full moon.
it's time to raise rates, period!
jmo
Ps. nice post [at least someone is trying to right the ship]
"The key is to find a path for expenditures and revenues that avoids the so-called “fiscal cliff” in the near term but that firmly reduces the trajectory of the debt over the medium to long run."
For that you need policymakers who can see past the next election - and voters who'll vote for them...
Something like 2/3 of the industrial world had been leveled and ours was built up for the war effort. The world was our customer and we loaned them money to buy from us. Today is the exact opposite. There is overcapacity everywhere you look, we borrow from our suppliers and from ourselves. We were also looked upon very favorably by a large percentage of the world, unlike today. Our financial house was considered sound and not a ponzi like today. The demographics were completely different as youth/old age ratios were favorable for growth. Today our youth believe OWS demands are "the right thing to do".
"we cannot dismiss the risk that the Federal Reserve may stumble as it eventually exits from its unconventional policies," They aren't even close to exiting. The market is up because they are about to enter phase QE3.
Excellent summary.
Our only real hope now is that someone out there stumbles worse than we are about to. And we cannot rule out a global war either, though I don't place the chance very high at present.
Pay attention, homiez. We are not at the top of our game this time. Not even close.
"The market is up because they are about to enter phase QE3." - LMFAO!! ZIRP and NIRP is QE by any other name, unless you really believe that there is no real cost for capital creation without creating somthing of real value. - FAIL.
You can both be correct.
It won't be called "QE3" because that is toxic now. It might not even be formally announced. However my guess is The Fed will be (already is?) working with the other CB to coordinate a massive liquidity injection, maybe around $2T, over the next 9 months to try and save themselves.
They will succeed for a while, because that is a lot of money. But as soon as they stop it will be over. I mean motherfucking over. Like "Dark Ages" over. All over the world.
We won't know what they are doing, but we'll notice. It will be a monstrous money party, and not half bad for anyone can get in. But it will mean nothing except that they are giving up.
What comes after -- I wish I knew. But it will be epic.
Right, it really doesn't matter what you call it, but to deny that QE1 & QE2 didn't lift the market is insane. Did it fix any problems? No. Will they try it again? Probably so. And I believe you are right they already are. The problem is, as always, it will create more problems than it resolves.
you do understand the physics [& mechanics] of a vacuum, and the horrors of compression gone terribly flaccid,...
currently pumping up this economy is synonymous to pumping up a busted tire.
eventually the whole tire must be replaced [no more greece for you?]
There is no such thing as overcapacity in a world with infinite human wants and needs. People live in poverty because of shortages of goods and services, not because of overcapacity. We don't suffer from overcapacity - we suffer from a lack of PRICE DISCOVERY due to intervention in the markets by central bankers and politicians.
The 48 recession was one of the worst because the Truman admin decommissioned the military...talk about a deleveraging cycle. Not true this time. Military is being ramped up for an undeclared war(ssss) in the ME, interest rates are at or near zero, so are Treasuries. Private US Banks will keep getting their London Fix...blah-bleeee-blah.
Locked in zero coupon war bonds make the historical comparison
meaningless.
The wasteland that was Europe and Asia after WWII also neuters comparatives.
Waste of time and effort to read.
F-.
http://anonymousmonetarist.blogspot.com/2012/07/fight-power.html
'How low can you go?...here we go again... They'll never care for the brothers and sisters'. -Public Enemy, Bring the Noise'You know, we always called each other good fellas. Like you said to, uh, somebody, :You're gonna like this guy. He's all right. He's a good fella. He's one of us.: You understand?... It's like a license to steal. It's a license to do anything.' -Henry Hill, Goodfellas
'U.S. futures industry investigators are looking into why Iowa-based collapsed brokerage PFGBest used a tiny accounting firm that appears to be operating from inside a suburban Chicago home to audit its books...' - Chicago Tribune 07/12
'All I know is that first, you've got to get mad.' -Howard Beale, Network
As the latest Ponzi within a Ponzi unravels within the comics perhaps a moment should be taken to focus on the bigger picture.
A progressive reading the FT and WSJ on a daily basis for years may seem to epitomize the duality of life but in truth how can one fight the power lest one at least stay acquainted with the outtake of said propaganda mills?
To wit, a young turk with most certainly an unabashedly bright future of the name Matthew Schoenfeld ( with CV of 'recent graduate of Harvard Law School'), penned a piece in the WSJ two or 'tree' days ago that was most certainly received fondly by the the proponents of the 'ideology of the rich' and their assorted sycophants.
He used the example of 'Micheal Jordan's exorbitant salary as making the Bulls better overall and by extension the league' to exclaim that income equality ain't what your lyin' eyes record. Quoting the Grand Poobah of Unintended Consequences, Larry Summers, "From the time of Pericles until the end of the 18th century in London-2300 years, standards of living increased perhaps 100%." ; Schoenfeld continues with, 'In the U.S. since 1790, by contrast, real per capita gross domestic product has increased nearly 4000%. Quality of life, in other words, increased 40 times more in 220 years of American history than it had globally over two millenia.'
He concludes with, 'perhaps a century from now low-income Americans will pity the living standards of today's 1%'.
Golly gee so I guess the surplus eaters stricken by the failure to liquidate the insolvent criminal syndicate and suffering from the greatest level of income inequality (give or take a few percentage points) since I don't know... the Tyler Rebellion of 1381... should count their blessings that they have indoor plumbing, and neither have to worry about the plague nor the fixing of maximum wages?... (they only fix minimum now).
Well done liege Schoenfeld, well done... verily though...
Let me retort.
It is obvious Matthew that your time at Goldman Sachs , Lehman Brothers, 3GCapital, and your upcoming stint at Morgan Stanley after graduation has and will give you a robust appreciation of the 'little people'.
Perhaps you might though be interested in what some of your fellow students (admittedly from a much lower caste) have to say on the troubles of the 99%.
Cwcs.ysu.edu/resources/cwcs-projects/defacto ... has been compiling a metric for 5 years now that calculates the defacto unemployment rate.
It is of interest to discerning folk for it closely mirrors the methodology employed to calculate unemployment during the First Great Depression.
The last tabulation was performed in January of 2012: Unemployed ...8.3% Marginally Attached...1.8% Discouraged....0.7% Underemployed...5.3% Excess Disability...6% (est) Government Programs 4% (est)
Total 26.1% (looks like there is a typo on their site on the discouraged total).
Again their methodology is similar to GD1, where they basically counted up folks that were able, and had worked in the past,and were not working now. Yes I know that the Jan '12 defacto total includes disability but gentle reader we all knows folks on disability... need I say more?
Another adjustment when comparing to GD1 is that given the Keating-Owen Act there were industries where it was legal to hire 'em on their 14th birthday.
Lastly, the unemployment rates in 1932, 1933 and 1934 were 23.53%, 24.75%, and 21.60%
So gentle reader forget about income inequality, forget about the defacto unemployment rate, cause the top1% back in GD1 should be pitied by today's huddled masses where the intertubes are free and the check is in the mail.
To each according to their eligibility ...for each according to their greed.
Fight the Power.
So Long, and thanks for all the fish Matthew.
Fighting the Power, www.electanewcongress.com
in the wake of WWII? More like 37 heading to 40
Mighty black of them to admit that there "might" be some risk out there somewhere...
"FISCAL CLIFF" DEBT TO GDP, austerity - all more illusions and delusions to take what little is left of the masses and transfer to the wealthy
"freedoms just another word, for something else to lose."
The Keynesians will still go to war.
http://areweinthefutureyet.com/
You mean he doesn't think the prospects of the U.S. paying back this debt level are as easy due to much higher energy costs (mainly due to oil), unfavorable demographic trends, increased global competition, etc.
This is basically a 'No Sh!t Sherlock' statement. You can use and learn from history but looking to apply it to most current situations is like trying to stick an oval shape into a round hole. At worst, a square one.
We also had a huge glut of savings that households and businesses were generally sitting on too coming out of WW2, smart public policy, and most importantly we set the rules of the game at Bretton Woods and through several other post-war treaties. This wasn't Versailles where the European powers (Britain, France, and Italy to a lesser degree) largely told Wilson and his delegation to piss off after WW1. It was either play by the U.S. rules or deal with the Soviets who didn't play so nice either especially under Stalin.
The 10-year Treasury bond, the benchmark rate for the US in borrowing money, dipped to an all-time low yesterday of 1.459%. Treasury sold notes at that price at a $21 billion auction, amid high demand. Today it’s jumped back to an astronomical 1.48%.
These numbers are outrageous. It shows both what a basket case the rest of the world economy is right now, and how desperate investors are for some economic growth somewhere in the world. This kind of lending costs investors money. Adjusted for inflation, the US now borrows at a real negative interest rate. Yet this has done nothing to increase borrowing to take advantage of the rates. This is fiscal malpractice.
Failing to take advantage of record-low borrowing rates is little different from setting cash on fire. We know that we have to make investments over time, just paying for them now would save tens if not hundreds of billions of dollars in the future. And while I know we had a half-decent unemployment report today, it’s probably attributable to one-time factors, and even if it weren’t, we would need years of similar reports to get the country back even close to full employment. The demand needs exist and are not being met by the private sector. Government has the capacity. Investors are begging government to spend. The refusal boggles the mind.
http://news.firedoglake.com/2012/07/12/global-investors-sending-giant-signal-to-u-s-please-borrow-money/
It would be Ironic if the Dollar dies on BTFD "October 21, 2015", or at least turns out be a Black Wednesday.
this article misses a few major points.
1) aggregate levels of private debt are outrageously higher in the u.s. compaerd to the period coming out of wwii.
2) u.s. now imports massive quantities of its own supplies/energy from the rest of the world so there is a huge balance of trade outflow
3) u.s. banking system was 'tamed' by fdr and by the end of wwii the fed war working for the treasury. the treasury is now serving the fed the imf and the exchange stabilization fund (esf) , thus it is captured by the private interests. During the post war period, there was a political subservience of the financiers to the government which resulted in execution of planned fiscal discipline.
4) the u.s. public did not have the massive amount of debt owed to them by way of the entitlement system. babyboomers have a lot of social secutirty coming due, are liquidiating seucrities to eat, and have a lot of medical needs. this is a huge private drain on government coffers.
5) the legal system of the united states could not be used to slow down and destroy the gears of effective government. there is a huge parasitic overhang now in the cost of running government , both in time, and money, which is that every act of legislation and executive order gets gummed up by execessive litigation. the courts have taken over too much authority from the other branches, particularly with respect to how LONG it takes to resolve a controversy. in essense they have asserted their laziness, to the detriment of the executive branch and legislative branch.
6) ------X factor-----americans are fatter and lazier and less skilled than in the post war period. people provide less labor value--in a holistic sense--- per capita. more routine tasks in their lives must be paid for instead of done with self help. this is a large shadow tax on the national wealthy as a whole relative to the post war period. the other way of phrasing it is that our machines are too complex compared to the past, and our overcapacity in the agricultural and manufacturing sector has led to a point where too few people can fix their own cars and provide a little extra of their own food. this huge 'dependency' problem is not a socialist problem per se, quite the opposite it is a direct result of progress (sub)urbanization and the high level of vehicle/computer/appliance, and general machine ownership to provide daily needs.
and the big one that ties this together.
7) the trust gap. the ultra wealthy elite have their money in offshore tax shelters and do not trust the government, nor do our bankers, and so our private financial system is tearing apart our public finances just as the german private financial system (german speculators and the reichsbank which was privatised) was doing to the german treasury. This is the exact opposite of the situaiton in the post war period, where the private banking sector was forced ( capital controls ) or willingly cooperative with the treasury . there was trust. if not by respect and common purpose , than by fear of the true emergency force of government, which could send the military to enforce the treasurie's willpower against most private banks.
Real Power from Fake Money?
http://shutupnsing.wordpress.com/2012/07/14/the-centralization-of-real-power-using-fake-wealth-self-interest/