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RE: "The problem with socialism is that you eventually run out of other people's money." - Margaret Thatcher
This holds true for both an economy with a finite currency system and a fiat currency system. But you are correct, in a fiat currency system the money loses value as more currency is created by banks.
And no. Thatcher is not incorrect.
Socialism can pay for its programs by only three methods.
That's it. Also to be clear. I don't consider what the U.S. has now as Capitalism. It has many many socialist programs all over in it. It is a hybrid.
The government produces nothing but laws, waste, and wars. It thus has no product of value with which to pay for its "free" and "socialist" programs.
That cost comes from the citizens, and whatever was saved up before the socialist programs were implemented.
It becomes worse because those programs are guaranteed. I don't know of a single program anywhere in any government that once the government guaranteed it the program didn't increase steadily in cost, and decrease in quality.
They no longer have to compete to get that business. It is guaranteed. Also since it is guaranteed they keep raising the price, often in result to people complaining about quality and them saying it is due to not having enough funds. So the program increases paying...
This is unsustainable. EVERY case in the world where it has been tried at a government level this has been the case.
Now as to Capitalism itself. I like free market, and laissez faire. If the government is involved and gives favors to some and blocks others that becomes cronyism and is not a free market. I also have researched and things people complain about such as Monopolies. They are not present due to free market or laissez faire... they persist due to government collusion. (cronyism)
What you are getting into here is gov law/policies and how govs earn/spend money. Yes there are millions of possibilities and alternatives on how governments can run their countries.
What I am simply telling you is that Thatcher's statement is mathematically impossible. The money is always there in any economy and someone always has some, therefor you can never run out of other people's money.
You are correct in a fiat currency economy if the gov is run by morons who create too much debt and too much money, the money will loose value and the currency will collapse, it has happened in many countries throughout history. But that has nothing to do with Thatcher's false statement.
I think you are reading more into that statement than what the quote meant.
Sure there is other people's money. I believe what she was talking about is that you run out of other people's money that you can GET AT. Sure, it accumulates other places. Yet if that is beyond their taxation methods then it is gone as far as the socialism is concerned.
Well I have no idea what she was thinking when she made her statement, but that is my point, the money is always somewhere, other people always have money.
How a government chooses to get that money or if they want to create new money or if we want to live in a society where the few hold the majority of the currency while others cant afford to eat, that is another topic...
Basically it is the difference between a one line quote, and an essay to explain it.