Obama Moving America To Economic Ruin

by Sal on April 3, 2009

in Economy,Politics

Anyone with even a basic understanding of idea of Economics will understand that when there is no balance between expenditures and receipts, disaster will usually become inevitable.  Sure, the average person or business that is deep in debt can refinance, perform balance transfers to new lines of credit, and move money around, but in the end, they are just forestalling the inevitable explosion that will result from too much debt.

In the government’s case, the problem is two-fold.  The government has the capability to both borrow heavily (which it is doing at unprecedented levels) and, since it controls the money supply, simply print money.  On the fiscal side, the President’s massive $3.2 trillion dollar budget resolution passed both houses of Congress last night, without a single Republican vote from either the house or the Senate.  The plan not only has enormous spending proposals and grows the size of government to epic proportions, it also contains the blueprint for massive tax increases to follow.  In addition to the $3.2 trillion budget, the $750 billion stimulus, and the $750 billion TARP plan, Obama at the G20 summit has now agreed to inject $1 Trillion into the world economy by floating more treasuries.  With deficits as far as the eye can see, there will come a point where our credit with the rest of the world will max out.  Already, China, our largest creditor, is expressing nervousness about the large amount of debt and is signaling that it is concerned that the credit of the U.S. will not be sustainable.  Additionally, one of the reasons why we are able to handle so much debt is that the dollar is the standard world currency.  With talk from both China and Russia about switching to a new international currency, demand for treasuries could sharply fall in coming years.

On the monetary side, the Fed is printing money to buy up United States Treasuries, mortgage backed securities, and to inject liquidity into the market.  So by buying up treasuries, the Federal government is essentially borrowing money from itself, and the money it is borrowing is being printed just for that purpose.  If the U.S. Government were a company, this would be known as “cooking the books.”  The circular print-and-borrow looks good on paper, but the practical impact of it is staggering.  With it, some are worried that we are not headed to a 1932-era depression, but rather a 1923 European-style hyperinflation scenario.

On both the monetary and fiscal side of things, we are headed towards economic disaster.  The wholesale borrowing and spending, and now printing of money to borrow, is potentially going to lead to a worthless dollar and a depressed economy.  With Social Security and Medicare defaults looming on the horizon , our future economic picture does not look good.  The current situation may become so tenuous in a few years that only a program featuring a dramatic, massive reduction in the size of government and tax cuts will get us out of this mess.  If the dollar collapses, the cure will be more severe.  The dollar or a new currency will have to be tied somehow to the Gold standard or some other commodity standard again in order to keep its value in-check.  This will dramatically decrease the available pool of money, and it will be years before we can return to where we’ve been for the past several decades.  Either way, the cure will be a lot more painful than it is now, and it will be due to the excessive government intervention and spending, both from this current crisis and from the past 80 years.

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The Other Shoe | Axis of Right
December 15, 2009 at 12:57 pm

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Ron Russell April 3, 2009 at 11:44 pm

Obama doesn’t care about the economic destruction of the United States—his goal is the establishment of a new social order, some form of socialism. He learned well from all those years that he and Michelle sat in Rev. Wright’s pews. The man is a socialist, not of the European varity, but a far more radical kind akin to Mugabe’s socialism. I shall call it Kenyan Keynesianism.


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