King Charles I of England dissolved parliament and ordered all the parliamentarians to return home on March 2, 1629, following years of rising tensions with his own government.
Charles had just been king for a year and a half when he became an extremely unpopular figure. One of his worst tendencies was repeatedly misusing his authority and enacting executive acts without the consent of parliament, such as raising taxes or establishing new rules.
However, Charles detested going through parliament and frequently found a way to avoid it. Frequently, he would imaginatively interpret cryptic clauses in old statutes as grounds for doing anything he wanted.
In one instance, Charles concluded that he had the right to demand payment from everybody in the nation making more than 40 pounds per year because of a legislation that was over 400 years old and first enacted under Henry III in the early 1200s. Not at all.
Another instance is when he asserted that he was authorized to collect customs and duties on certain goods because of “tradition,” despite the fact that English law clearly needed legislative consent for such imposts.
Famously, Charles also requested money from banks and wealthy merchants, referring to these demands as “forced loans.” Even more, he took literally tons of silver held at the Royal Mint for the benefit of affluent people and foreign nations.
In an effort to obstruct Charles, Parliament rejected his request for funding to form an army and fight in the Thirty Years War, which had been raging in Europe since 1618. The parliament once more turned him down when he requested money to bail out a close relative in Denmark.
Sometimes their arguments even reached the courts, where juries had to decide if the king’s laws and taxes were legitimate.
But nothing was ever settled, and no compromises reached. In fact the conflict continued to escalate, until Charles finally dissolved parliament in 1629… effectively shutting down the government.
This is an often-repeated story throughout 5,000+ years of human history; there have been countless examples of dysfunctional governments and terrible leadership that fail to reach a rational compromise over the nation’s finances.
And such examples tend to be a hallmark of a nation in decline.
In the case of Charles, he would go on to be arrested, tried, and executed, and England plunged into a civil war.
Louis XV of France, and his successor Louis XVI, also routinely fought with their parliaments over royal finances. France would soon go bankrupt and dive head-first into revolution.
These are lessons worth noting, given that the United States government is once again at the precipice of default.
The national debt now stands at nearly $31.5 trillion. This is the current statutory ‘debt ceiling’,
meaning that the Treasury Department no longer has the legal authority to borrow more money.
This means that yet another government shutdown is potentially on the table, as is a default on the national debt.
If this story sounds familiar it’s because this has already happened in recent history– in 2011. And 2013. And 2018. And 2019.
Now it’s happening again. And unsurprisingly, both sides have dug in and claim they are unwilling to negotiate their demands.
To say this is yet another humiliation for the United States is a massive understatement. The entire world can see that, not only is the US government incapable of managing its finances… but also that its politicians cannot rationally solve problems. It’s pitiful.
What I really want to focus on today, however, is the future: what do you think this problem will look like 10 years from now?
Today it’s already a terrible embarrassment… and a major problem.
The national debt is so big that, this fiscal year, the Treasury Department will spend close to $1 TRILLION just to pay INTEREST.
This is happening at a time when:
1) Interest rates are rising (which means that the government’s annual interest bill will increase)
2) The economy is slowing (so tax revenues will decrease)
3) Government spending is still outrageous, with a $1+ trillion deficit expected this fiscal year
This is a pretty disastrous scenario. And if you plot this trend line starting from where we are today, it’s easy to imagine what might happen over the next decade.
If deficits are already $1 trillion per year right now, how high will they be in a decade? If the national debt is $31.5 trillion today– roughly 120% of US GDP– how high will it be a decade from now?
It’s silly to assume that the United States can simply keep growing the national debt forever without consequence. It’s silly to assume they can run trillion dollar deficits every year without consequence.
Today those consequences are just embarrassments and minor inconveniences. Ten years from now they may be major catastrophes.
This is the entire point of having a Plan B. The future is far from certain– and it’s possible that voters finally elect competent leadership who act responsibly and arrest the nation’s decline.
And that’s a nice hope, and it would be great if it happens.
But it’s a lot more rational to focus your energy on things that you can control. And that’s a Plan B.
If your government is on a clear path to more humiliation and fiscal ruin, it makes sense to ensure you don’t have all of your eggs in one basket.
Source: The Daily Bell Rephrased By: InfoArmed