1) The co-existence of a large segment of the population that is heavily indebted with a likewise heavily indebted government. Heavily indebted would mean debt service costs approaching, or exceeding, 50% of revenue. How, for example, could a government justify cutting or eliminating welfare, healthcare, education, or unemplyment insurance, as some of its largest expenditures, while still remaining current on interest payments?
2) A precipitous fall in income that results in the rise of interest payments as a percentage of spending and revenue. Market collapses are typically associated with such falls in income. As the devastation in financial markets flow through to the real economy, liquidity and credit dry up. Recent examples abound. The collapse of oil prices in mid-eighties Alberta, the Newfoundland cod fishing moratorium, the BC softwood lumber marketing problems due to the US tariff, are some in Canada. I'm sure other countries have had their share of these type of problems, too. Historically, our governments quite often withold economic and financial information in the early stages of these occurances. The decline of personal income is particularly signifigant. As the standard of living declines noticeably, and the interest cost of indebtedness rises disproportionately, finance capital and 'usury' become the enemy. In this phase, finance capital may demand either changes in spending policy, or require security for borrowing from the affected government. In the early 1990's frequent warnings to the Federal and Provincial governments in Canada from rating agencies, and subsequent downgrades, were instrumental in the shift away from 'deficit' financing and towards 'privatization' of Crown assets and 'cutting government waste' (services). The deficit in Canada was reduced Federally by downloading much of it onto the Provinces. Who, in turn, are still downloading it onto their respective citizens.
3) At this stage another condition is critical. The credible identification of ''external forces" ~ Wall Street, the World Bank, the IMF, etc., with the problem. Entities outside the geographical boundaries of the affected country, or province, that can be blamed for the conditions that are developing. An 'us' versus 'them' pschycology re-inforces the push to 'do something'.
4) Equally important at this stage is the emergence of a theory that can rapidly be popularized and translated to the mass public that attaches blame to these external forces. And proposes a solution. Such a theory, essentially moralistic, boils down to the evils of money lending.
I leave it to the reader to determine what stage his respective area is in at the moment, and which direction it is heading. And whether Social Credit may play a role given the right opportunity.
Joe
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