Even Finland, the standard bearer for what socialism should look like, just dissolved it’s government. Essentially they ran out of other peoples money and the people they “represented” didn’t want to give up any of their benefits.
Finland’s problem was very closely related to Venezuela’s. Neither of them controlled their own economy because they had debt denominated in a currency they don’t control. Finland was subject to an exchange rate to the Euro and Venezuela’s debt was largely denominated in US dollars. Had they only had debt denominated in their own sovereign currencies they could never involuntarily fail to pay any obligation. As it was, the owners of the debt decided the exchange rate and ever larger amounts of currency had to be created to service that debt while each devaluation of the nation’s currency continued the decline as Greece and Turkey are finding out.
Such economies are quite similar to those using a commodity (gold) to pin their currencies to. They depend upon trade surplus to fund their growth and end up leaving a lot of economic potential unused due to currency limitations. If they are net importers they are doomed to begin with, which is why Nixon took us off the gold standard when our trade balance turned negative. The simple fact is that no case of monetary failure in history can be attributed to spending alone, especially with a sovereign fiat currency. It is impossible.
For one, a sovereign currency-issuing government never actually borrows to increase its money supply. It would have to create the money for it to be available to borrow and then there would be no point to borrowing. Such a monetarily sovereign government normally uses both bond issues and taxation to “reduce” the amount of money in circulation, destroying any revenue upon receipt by applying it to the debt that it was created from, not recycling it to spending. This is how inflation is controlled via fiscal policy. All spending is via the creation of new currency. Deficit and debt are nothing but accounting entities that inform, not fund.
Government spending in excess of tax revenue is the only source of “net” currency to store value a fiat based economy has. The red ink of the issuing government becomes someone’s asset, black ink, in the private sector. If that government balances its budget, an effective 100% tax rate, it starves the economy and causes economic contraction. It also effectively steals the resources and labor that the private sector exchanges for the currency the government can create at will. Denying people much-needed currency to fund their economy while the available resources to accomplish social goals sit idle is not logical. A sovereign fiat currency issuing government can “afford” anything that is for sale denominated in the currency it creates at will.
