Prior to World War II the British pound was the world’s leading currency. For almost 200 years, beginning in the 1700’s, the Great Britain was the richest nation in the world. The downfall of the British Empire came from spending, taxes and debt.
At the end of World War II, the Labour Party took over the reins of government. They embarked on a socialist system of big government, entitlements and unprecedented spending. They were interested in “spreading the wealth.” By 1967, spreading the wealth put the British economy deeply in debt.
To ease the debt situation, in 1967 the Labour Party decided to devalue British currency. In simple terms, devaluation is lowering the value of a nation’s currency. They believed that this would enable people to afford their debts. This lopsided thinking did not take into account that devaluation forced people to pay higher prices for goods and services. Everything became more expensive. It ushered in one of the worst decades in modern British history.
In the 1970’s, the British government put a freeze on wages. This sparked continuous strikes throughout the nation. Britain was a money pit. Non-productive mines were subsidized by the government. The Labour Party had the support of the labor unions so the government imposed regulations that strangled British industry. This was payback to the labor unions.
In 1975 inflation skyrocketed 26.9% in a single year forcing prices even higher. Even electricity was rationed. Television companies had to cease broadcasting at 10:30pm each night to save electricity. Britain fell off the fiscal cliff.
What Americans don’t realize is that many prominent economic business people and economists are alarmed about the Federal Reserve’s borrowing policies along with the trillions being spent by the Obama Administration. They foresee economic calamity. Debt always has consequences.
A microcosm view of the future is the recent bankruptcy of Stockton, California. A judge has allowed the city to go into bankruptcy because there was no other solution. The city cannot pay its debts.
Rather than learn from history, the Democrats continue with their failed Keynesian idea of spending their way out of debt. It didn’t work in the past so why do they think it would work today? When our economy goes into a tailspin, you can be sure they will blame the Republicans and everybody else for their own failed policies. Unfortunately, it is the American people, especially the middle class, that will suffer from their failed solutions.