I share your concern about the rise of a dictatorship in many Western democracies, the gradual but consistent eroding of civil liberties for the sake of an illusion of security, the continual corruption and robbery that plagues public office around the world and the false promises of a return to former glory is a sign of a historical truth.
Dictatorship naturally arises out of democracy, and the most aggravated form of tyranny and slavery out of the most extreme liberty. -Plato
No system of governance is permanent, I do believe fiscal collapse is very likely just from an economics point of view, however, I don't picture it as a doomsday scenario like some do. In history every single international fiat currency has collapsed, ever since the concept of fiat currency was first proposed, and this was at a time when it was all backed by precious metals to varying degrees. Banks and governments around the world are on the verge of a massive liquidity crisis, they will become insolvent very soon and there is nothing that can be done about it. Only QE-infinity (infinite quantitative easing, printing of money) as the FED's Bernanke has dubbed it which the ECB is following suit on and it won't be long before the FED and the ECB become insolvent.
Austerity, inflation, default. The natural cycle which has been played out several times already.
What is the likely outcome however? Most likely a move to a independent (like there is such a thing) gold-backed global reserve currency. China, Russia, Switzerland, and several other major players have doubled or tripled their gold supply in the last few years. All Commonwealth nations have constitutional right to confiscate gold from it's citizens at certain spot prices.
Probably be a bit turbulent for a few years, could be a major war as powers realign for better positions in the next stage of human history (which is always marked by the conflicts), could be civil unrest in less stable countries, but everyone will just start from scratch, like they always have. New fiat currency, new reserve, and new laws that will "promise" a better future.
I'm far more concerned about the political and civil fallout than any economic fallout. People will always manage to find a means for economic understanding, like they always have.
But governments are dangerous and unpredictable.
