A few years ago, The Economist published an issue called “The Triumph of Big Government,” highlighting the rise of government intervention as the main driver of economic recovery and growth. The years of budget and deficit control were over. Mainstream economists hailed the decisive action of governments in developed nations, committed to spending to boost growth and abandoning the old “austerity” principles.

Only a few years later, The Economist publishes an issue titled “The Coming Debt Emergency,” mentioning the enormous deficit and debt problems in France, the United Kingdom, Japan, and the United States.

Rising government spending and public debt create economic stagnation and declining living standards. Many citizens believe that the state will give them prosperity and equality. However, the state only makes paper promises by issuing debt, creating a constantly depreciated currency. Taxpayers are constantly expropriated, while the recipients of subsidies become a dependent subclass. Who wins? Bureaucrats.

Deficit spending is not a tool for growth. It erodes prosperity, creates persistent secular stagnation, real wage growth decline, and poor productivity growth.

High public spending and government debt falsely inflate GDP through government outlays while, in most cases, masking a private-sector recession underneath. GDP is easily manipulated by increasing government spending and changing the calculation of GDP deflators.

Many market participants have built long positions on euro-denominated assets, expecting a positive outcome from the German stimulus plan and Rearm Europe projects. However, betting on a stronger euro may be optimistic considering the poor track record of these government plans, the rising fiscal challenges of France and other nations, the elevated debt and enormous unfunded liabilities, as well as the imminent implementation of a central bank digital currency. There are undoubted fiscal and deficit problems in the United States, but the relative position against the euro is undeniably stronger considering all the previously mentioned factors.

The world is not going to see another crisis like the ones experienced in 2008 or 2011. No central bank or government is going to accept it. You may think the prospect is good news. However, the flip side is that this means secular stagnation and perennial crisis for wage earners and the middle class. There is a slow-motion eternal crisis that leaves the average citizen wondering why they cannot make ends meet, while governments boast about their economic stability.

A crisis is only the manifestation of a previous excess. When governments prioritise prudent investments, healthy public accounts, and attractive taxes, crises end quickly, and the recovery is stronger. However, when governments claim to be the solution and mask economic imbalances with increased spending, debt, and taxes, they merely create a significant transfer of wealth from the private sector to themselves, resulting in persistent inflation, higher taxes, weaker productive growth, and lower real wages that burden taxpayers.