In case you have been living with your head in the sand (or up your nether regions, depending on your political bent), our government is spending money at a prodigious rate, to the point that “mandatory” expenses now exceed revenues (where “mandatory” means Social Security, Medicare/Medicaid, and interest on the debt… and I use quotation marks around that word, because I only see one item on that list that is actually mandatory).
So what is the federal government doing about this rampant, out-of-control spending? If your answer is, “Cutting up the credit cards and forcibly instituting a budget-with-a-surplus,” you obviously are not familiar with the United States Government, and the political intrigue that swirls around it. Nope, instead, in their infinite wisdom, the Federal Reserve Banks* are “monetizing the debt” – in short, they are assisting the Treasury in printing more money by purchasing up debts (the US Treasuries) with “base money” (physical, hard currency)**.
Which brings us to today’s quote of the day, found in the title of this post by Les Jones:
Printing money to pay for unsustainable spending is bad, mkay?
Imagine you live on a budget of $1000 a month, but you are spending $1500 a month. Imagine you have finally reached the limits of your savings account, maxed out your credit cards, and gotten all you can from those you found willing to lend you money. Now, imagine that your response to this is, instead of curtailing your spending, you simply print up your own batch of cash, and start paying down your various loans, debts, and charges. Discounting the illegality of printing your own money, do you really think that will fly? Sure, on a small scale, who is going to notice when the amount of cash in circulation increases slightly… but when it jumps across the board, what happens?
This happens. When we visited Slovenia, I actually saw some of the multi-million dinar bills left over from the Yugoslavian economic disaster… they were bright, they were colorful, and they were completely worthless. Personally, I would very much rather our country not go down the same path tread by so many other countries before us – you would think we would learn from their experiences?
(* – It is important to remember that the Federal Reserve Banks are not part of the government, and have a very poor performance history. Suffice to say, I have my doubts as to this move increasing their batting average.)
(** – This is a gross oversimplification of the situation, but I am not an economist, and I did not stay at a Holiday Inn last night.)
Well, that depends on which definition of “physical, hard currency” you’re using, I suppose – I don’t think they’re using gold, silver, or any other real hard currency.
Hence the use of the word “currency”, rather than “value” or “supplies” etc.
Unfortunately, the days of a gold standard are well behind us, and not at all likely to return… After all pegging your currency against something like that does hold you significantly more responsible for how that money is being spent (since you cannot exactly just go out and create more), but when was that ever considered to be a “good thing” by the government?