Debtor’s Prison for a Nation?

The amount of the debt we are accumulating and proposing to accumulate has become more than worrisome.   In the olden days we had debtors’ prisons for those who couldn’t satisfy their debt obligations.  Newgate prison in London was one of the most famous of these.  In the Colonies we had them too until after the Revolution and for a while beyond that.   They are now a thing of the past.   The ancient Romans were even more severe in their treatment of debtors who couldn’t pay off their debts.  The creditors after trial and the establishment of debts due provided that the unsatisfied creditors could kill the debtor and divide up his carcass.   Of course this was after they had stripped him of everything of any value.   Becoming bankrupt in those days was not a very viable option.  Most debtors who could would flee.

Our GDP is about 14 trillion a year right now.  Before all the extraordinary actions taken in the fall of ’08 the Federal government’s share of that was about 3 trillion and when you add the States and local governments that was an additional 3 trillion.   So almost half our GDP is government of one sort or another.   Now the politicians are proposing trillions more.  During this year more than half of our GDP will become Government spending.   Government gives us somethings that we need of course, like security and safe skies to fly.  But it doesn’t “produce” goods or services for the general economy.   At least so far the government doesn’t own and run your local super market.  That may change if we continue with the bailout nation approach to solving our economic difficulties.   We won’t even discuss today the trillions of dollars in debt that we already have on the books for our accumulated deficits and the projected shortfalls for Social Security and Medicare.   The fact is the government will be determing the winners and losers in our economy to a very large extent because of its power of the purse ; its purse which can only be filled with the taxes it extracts from us.   The government has clearly demonstrated that it is currently incapable of balancing a budget or even attempting to balance a budget.   The influence of government on our economy will have deleterious effects.  The Government is not innovative or creative.  I mean Apple and Microsoft have come out with many news gadgets and gizmos we all use and love.  You want the Government deciding what kind of computer you can buy and at what price?  or the kind of car you can drive?  AOL had a weird business model at the beginning of is life by literally giving away its software to anyone.   That turned out to be a smart decision.  I doubt a bureaucrat would have come up with that one and certainly would never had it approved up the chain of command.   We have entrepreneurs for a reason.  That is not the Government’s forte.

The government can’t be put into debtor’s prison but might deserve to be there.   The only two methods for dealing with the current debt  and the insatiable appetite of the government to spend more is to print more money or borrow even more.   The borrowing will continue for a while with success but at some point the foreigners and even our home grown investors will not want to loan any more money to the government.  If you had a relative who was notoriously profligate would you continue to loan him  money?   The government is spending money like a drunken sailor on leave.    I am aware of the arguments that we must have this additional stimulus to make our economy grow.  I find them unpersuasive and very dangerous for our future.   Those proposing these giant spending plans are the very same people who got us into trouble in the first place.  Why have they become so smart overnight.   Some could argue that we could raise taxes to reduce the debt.   But we are reaching a tipping point in that area and the returns will diminish by squezzing harder.  Less juice will flow from the fruit.   Only a little over half of us pay any income taxes as it is now.  Those that pay none are going to get a tax rebate which is a lie, it is a transfer welfare payment–a redistribution of the wealth.   Remember that anything, and I mean anything, you tax you will have less of.   Taxes don’t create wealth for anyone.  They merely empower politicians.    When we can’t borrow enough we will simply print more money.  That will devalue the dollar and cause inflation.   That is a fact that can’t be disputed.  Those dollars rolled off the mint presses under the direction of the Federal Reserve aren’t adding real wealth to the nation’s store of value.   They merely provide a method for the Government to pay off debts with inflated dollars.   It also means we have less ourselves.  We might have more dollars in our pocket but they won’t buy as much as they did earlier.  It is a net loss for all of us except those in p0wer.

Please read some history of the Federal Reserve.  You will learn lots.   We do not have to become a debtor nation with debts beyond our ability to pay.   We all need to blow hard on Washington to clear away the smoke from in front of the mirror.   

I wonder how the folks in Spokane feel about the danger of Global warming this winter?


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Filed under Economics, government, history

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