The bailout monies continue to grow and the list of beggars at the Feds’ door also is mushrooming with each passing day. Even more states and local governments are now saying they deserve some bailout help. The numbers have become so staggering that I fear to many ordinary folks that they are becoming meaningless and that is dangerous. Only a few short months ago the mentioning of 100 billion for any government program would have seemed off the charts. People would have gasped and they did gasp at the first major bailout proposal of 700 billion in September. Now the numbers have run into the trillions and the Big Three bailout request is probably going to be approved if for no other reason than that it seems like chump change all of a sudden. What’s 25 billion after all when we are talking now of over 3 trillion in bailout funds for the multitude of programs now in play.
I don’t like repetition but we all need to bear in mind that the Government has NO money. Only we have money and it is our money and our credit the Government is using for these bailouts. The piper must always be paid. Who is going to pay for this enormous expense? Not the Government, but you and me. The Government can print money literally but that doesn’t work well over time. Usually the Government borrows the money but our creditors may soon become unwilling to loan us any more or else start imposing new conditions on the loans that affect our domestic and foreign policies and economy. Germany tried to print up money as one way to pay its reparations debt under the Treaty of Versaille after WWI. That ended up getting them into hyperinflation that damned near completely ruined what was left of their society in the ’20’s. The war debt was not the only reason behind the inflation but it was certainly a significant contributing factor. You should study the history of Germany in the ’20’s as a background for some of the economic matters facing our nation today. There are many disparate factors and differences between then and now and our society and theirs at the time but the lessons are none the less quite revealiing. Recall too that it was against this economic turmoil that Hitler began his rise to power because the people were so desperate for hope and change. I urge you to get a good history of that era. There are many sources available.
Printing money would make each dollar worth less. It makes it easier to pay off all those treasury notes bought by the Chinese for sure but it also destroys our own wealth at home. Inflation is a killer of any economy. It will grind it to a halt quicker than anything and you end up with almost a barter system rather than a modern economy. With inflation you get to pay off your mortgage with those cheap new dollars so that is a real bargain for you but then you have to buy gas, groceries and pay for insurance, a new car, etc. and the prices for all those items will skyrocket. Believe me you won’t feel or be rich with inflation.
There is nothing written in the stars that says we must spend all this money on the bailouts. Printing a little money will work but only if it is limited and we stop at the right time. Unfortunately, inflation in its early stages is like an addition. It is so easy to do and there is all this money to spend at first but quickly the prices for everything starts to accelerate and when you reach a tipping point it spirals out of control. No economist can predict with accuracy that tipping point. If we allow the use of debt for all these bailouts we run the risk of facing tax rates of such proportions that they couldn’t be borne. Remember also that only about half of us pay any income tax at all now. The amounts to simply service the interest on these debts will be approaching 1 trillion dollars a year. It is already a several hundred billion every year now for debt service on our national debt.
We either print more money that loses value and causes inflation or we borrow and have to deal with repayment. We pay the piper or we kill the piper. I don’t really think we want to do the latter. There is a third choice. We cut back on these bailouts dramatically. Stick with the original 700 billion number. Otherwise let the market do its work and over a period of a year or two things will be better. Failing companies should use the Chapter 11 alternative. There is no free lunch and there damn sure isn’t a 3 trillion dollar free lunch. We simply can’t afford it. Lastly, that much money sloshing around in Government coffers inevitably leads to Government control of our lives, our economy and a draconian intrusion into our freedoms. At my age this is advice for my kids and grandkids. I do hope someone will listen out there. Civil unrest and true taxpayer rebellion loom on the horizon if we follow the present announced course. The new administration whatever you think of it can’t change human nature, the law of supply and demand, the rights of creditors holding our debt or creat wealth out of thin air. It can balance the books and we should demand that it do that.
The Christmas season is upon us. I confess I love most of the Christmas carols and music of the season. It reminds me of hot chocolate, family and friends and a spirit of giving for others and hope.