Countries that go through paper money crack-ups tend to be overwhelmed by some combination of financialization and taxation — both of which amount to close to the same thing.
Finance, properly understood, exists to make complex plans feasible. Finance under central banking tends to perform some of the same functions as with more historically stable hard-money finance, but with some critical distinctions — namely, that to make most plans possible, everything needs to go through the public banking system at some point.
Further, a central bank or some sort of coinage monopoly can continually skim and redistribute throughout the financial system. Currency ceases to be a highly accurate unit of account — a means of ‘keeping score’ — and becomes more a measure of how well connected and obedient you are to the system as a whole.
Under such a system, price distortions become systemic. This is what Mises called the ‘calculation problem’ — when the currency is elastic, it becomes a matter of debate as to whether or not its quantity is increasing or decreasing. Traders and other actors in the financial markets will often debate whether or not conditions are ‘inflationary’ or ‘deflationary,’ because even with all the reporting requirements, it’s not even possible for the central banks to ascertain with total accuracy what’s actually going on with the money supply and what the direction is likely to be.
Just correcting these price distortions becomes an entire industry. Speculators correct price distortions, but the need for them becomes most dire in paper-money type systems, since the unit of account is systemically and unpredictably distorted through unequal and challenging-to-predict gyrations in the supply of money and credit along with the political system.
Under such conditions, to be a skimmer becomes higher-status than to be a producer. If producers exist to be milked by the connected, more people will try to pile in to the skimming side of things than the productive side.
The overloading of university systems throughout the modern world tends to be a good indicator of this development. Students who attend for careerist reasons tend to be there to accumulate credentials under the false pretense of learning ‘skills’ or ‘relevant knowledge,’ while they’re really accumulating connections and pull.
This problem has become most severe in Europe in particular, as entire generations of young people — who had expected to enjoy happy, fat lives as parasites upon graduation — discovered that the existing parasites were not too keen about leaving their blood-sucking spots. So they must return home, be unemployed, and collect paltry welfare checks instead while they post updates on social media.
It’s less that, as Ayn Rand had hoped, the producers would band together and rebel. Rather, it’s mostly the opposite — the producers will instead happily collude with the parasites to kill off their competitors. Rand also sort of understood this — which is why she put so much effort into the construction of Objectivism as a secular philosphy and social group — but it never reached the stature of a religion or full culture which could have prevented the eventual destruction of the West on the predictable socialist line.
The descendants of the classical liberals will tend to want to save liberalism from its own consequences, while still preserving it as a tradition. What seems to be more likely is that the liberal states will just be destroyed by internal strife and external competitors. Its line will be broken, and the land where it thrived will be salted over.
This is the difficult-to-conceive of aspect of things that few will want to say. It’s one thing to contemplate your own death — quite another to contemplate the death of your civilization.
The alternative prediction, which some have made, is that no such external competitors exist, and that the internal strife will be manageable. Judging on the longer historical scale, neither seems all that likely, even allowing for impressive technological changes like the development of nuclear weapons.
This doesn’t pass the test of observation, as states like Russia have seized territory from the American orbit with only a weak, erratic, and unenthusiastic resistance — quite recently besides. Weak rebels have sent Americans packing from Libya to Yemen, with no attempt to mount a defense or a retaliation. The loss of informal territory is already happening abroad. The highly unstable and unpredictable international financial system is a fulcrum on which all the other international systems rest. As it destabilizes, so will everything else.