I recently wrote an article entitled “The Circles of Socialism” in which I described how the federal government has bankrolled its deficit spending. Since he took office, the President and Congress have been spending approximately $1.8 trillion more than the government takes in through tax revenue.
This massive overspending must be bankrolled in some form or fashion, and Washington has found a way to make money out of thin air. The scheme, wherein Washington monetizes its debt, is something that would make alchemists of old green with jealousy. Only DC bureaucrats could come up with such a sham, all in the name of “stimulating” the economy. At the rate Washington is printing money to pay its own credit card bills, the only thing that’s truly being stimulated is inflation.
The “circles of socialism,” as I have styled them, are as follows:
- Congress and the President spend billions of dollars they don’t have.
- The U.S. Treasury issues more bonds to bankroll the Federal deficit.
- Since investors are less interested in buying the Treasury’s increasingly worthless pieces of paper, the Federal Reserve therefore becomes the biggest bond buyer, buying the debt with money it prints.
So, the long and short is that Washington merely prints the money it needs to pay for its spendthrift ways.
This cannot be long sustained.
When dollars are printed so easily, with no underlying increase in productivity or goods and services, they decline in value. This hurts every American and American family by diminishing our purchasing power – driving up costs at the store to buy everything from corn flakes to clothes. All this economic destruction is carried out in the name of “economic stimulus.”
Printing money to monetize our own debt is bad enough, but yesterday the U.S. Federal Reserve decided it would do the same thing for the European Union. The only governments on the planet that are in deeper debt than our own are in Europe. Virtually every day, we are seeing news reports coming out of Italy and Greece ringing the death knells of their impending economic doom. This doom is driven by these nations’ absolute inability to slow their profligate spending.
So, what has our Federal Reserve decided to do?
Bail them out!
The only thing worse than bailing out an overspending President and U.S. Congress is bailing out some spendthrift European Parliament. That’s right, the U.S. Federal Reserve is going to print billions, perhaps even trillions, of dollars to bailout the European Central Bank to prop-up the European Union, without requiring any financial reforms!
If Washington and European capitals were addicted to alcohol and pills like they’re addicted to spending, we’d have to say that the Federal Reserve would be their “enabler,” if not their “dealer.” The Fed’s constant printing of money is destroying the financial future of American generations yet to be born, all in the name of protecting politicians’ pet projects.
My friends, the American people ought to be outraged. It is beyond time to audit the Fed on an annual basis, and clip the wings of an out-of-control Fed Chairman by sending Benjamin Bernanke back to academia, where positive results aren’t expected.
The Federal Reserve may pose the single greatest economic threat to the United States at this moment in history. Yesterday, they affirmed my conviction that this is true.