Beyond the Cusp

March 23, 2009

Explaining the Economic Predicament

Filed under: Israel — qwertster @ 5:04 PM

Perhaps it is time to simplify the complexities of the whole mess we are in and the even larger mess we are making of the situation. Last week I wrote “Crossing the Line That Broke the Camel’s Back” in which I warned of the crisis to come as we print monies to cover government spending that we are no longer able to cover by loans from other countries, mostly China. This is called monetizing the debt, a euphemism for inventing worthless monies. To simply print new money without any actual capitol backing only devalues the rest of the money supply. A simple way to look at this is to look at our dollar as one-dollar stock share in America. By printing money to cover new government spending does not make that spending free, it devalues each one-dollar stock certificate making everybody’s wealth to be downgraded by the percent of total money to the amount printed. In time, this will directly raise the price of everything you buy as the product’s value remains the same but the money’s value is decreased.

Where the American economy is fairly expansive and probably could survive this initial printing of “funny” money, one must consider how many times can this be used to address emergencies before vitally wounding the value of our money. This is becoming pertinent as we are no longer able to find willing backers for additional government induced debt. We will either have to use prudence and spend less or use creative financing, one method being printing monies making funds out of thin air. We are not creating money by printing new monies equal to the pressing needs for funds by government; we are transferring a little of ever dollar to give value to this new money. This obviously begins to be a serious problem, as the newly printed money becomes a significant percentage of the total money supply. The larger the percentage, the more serious the devaluing. We can make more money only through growing the economy, not by printing worthless dollars that can only steal their worth from each and every existing dollar.

Where we monetized approximately one trillion dollars of new debt to cover the latest installment in our bailout process this past week, we find that we have now come up against the need to monetize additional debt to do what we were told the initial $750 billion given to President Bush was for, namely buying toxic debt from banks and other lending institutions. President Bush and his Treasury Secretary then diverted those funds into buying preferred stocks in these institutions thus making government a business partner. As I have pointed out, this is the first step towards a fascist government where the government holds sizeable interest and influence in the business sectors. This is more nightmare than Constitutional influence. If anything, the Constitution of the United States would be seen to forbid such an alliance of public government with the private business sectors. This does not bode well as this is exactly what brought down the Weimar Republic of Germany, leading to the Nazis and WW-II. This is also the exact path that will eventually lead to needing a dump truck of bills to do the weekly grocery shopping. We must demand this evil printing of unbacked “new” money cease before the damage to our economy and our own monetary holdings becomes severe and irreversible.

Beyond the Cusp

1 Comment »

  1. We’re assuming that the Oministry is actually wanting to save the U.S. economy. Unfortunately, that does not appear to be his goal.


    Comment by Jenn Sierra — March 25, 2009 @ 1:26 AM | Reply

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