Developed countries are falling into a "deflationary debt trap," [Soros said] in which consumer spending falls, products become more expensive, tax revenues drop, and sovereign debt grows, Soros said last week, according to the Wall Street Journal. As a result, he said, the global financial system is in a "self-reinforcing process of disintegration."
Let's take these things one by one:
"consumer spending falls" As a consumer, I have the right to not buy things. Consumers are free to exercise this right. No one can morally force them to spend.
"products become more expensive" Producers, likewise, are free to price goods as they wish. Understanding that the rich are successfully creating a wealth divide, producers begin to go where the money is. Why not get a good profit from one's fellow richies instead of competing for the diminishing monies held by less rich?
"tax revenues drop" This is a little harder for me find my way around in. Why not raise taxes? Are the politicians that weak? Is our system that weak? are we that scared of these morally poor but economically rich persons, many of whom are psychopaths?
I suppose my language is not very polite, but anyways...why not just tax the rich? Soros has around 30 billion dollars I believe. Just raise money by snatching it back from the rich and returning it to the people, who are understood I hope as the ones with the moral right to the system's money? And everyone is going to argue with me on that right? Or else just ignore me.
This article on Huff also...."Borrowing costs for Italy and Spain recently hit record highs". In all such cases, what seems to be happening is that borrowing turns out to be outside of the normal market mechanism. This is the mechanism by which, amongst other things, prices are set. Markets, of course also sometimes reveal that some product offerings is going to be unsuccessful for the producer, and then the product needs to be withdrawn. Therefore it seems that the so-called "borrowing" of money is not a market act at all. It certainly does fall under the topic of economics discussion, but the phenomena of "borrowing" are nevertheless not market phenomena. Economists were wrong to ever think that borrowing, or the amounts of interest on loans, was an authentic example of a market "item," or product item.
Interest is something different. Interest is simply a bet on the future success of capitalism itself. As markets continually seem to do well, more and more persons borrow. As the demand for money increases, the Fed (not the market) makes the required adjustments. Interest rates become too high, and borrowing lessens. Or, if the economy is doing poorly: in this case the Fed lowers the rates. All of this is not market stuff, not at all.
What you get, in the end, is too much money in the system. Although this does not create inflation, the money is not being properly used, and the whole economic system is thrown off and the result could be the complete failure, not of markets so much as the failure of the total capitalistic economy.
How do we dig down to the real causes of such a catastrophic failure? I don't know. It would require a lot of work --- a creative sort of work that economists are not doing.