Monday, September 07, 2009 Posted by Shattered Paradigm
The devastating economic crisis of the past year caught many Americans by complete surprise, but the truth is that sound money conservatives such as Ron Paul have been warning that this disaster would come for decades. Just as it is true that an individual cannot borrow increasing amounts of money indefinitely without getting into very serious trouble, the reality is that the U.S. government cannot borrow larger and larger amounts of money indefinitely without it causing a complete economic disaster.
Just consider the U.S. national debt chart below. It shows the rapid growth of the U.S. national debt over the decades. But what it does not show is what has happened this past year. Because of the economic collapse and all of the bailouts, the national debt of the U.S. federal government has absolutely exploded. The U.S. government has been spending money so fast and in so many different ways that nobody is quite sure exactly what the national debt is at now. The more conservative estimates place it around 11 trillion dollars, while other estimates place it much, much higher than that.
So what is the answer that the Obama administration has given us to this massive debt problem?
Borrow and spend more money of course!
The Obama administration insists that this injection of money into the economy has fixed it.
That is kind of like going out and maxing out all of your credit cards and having to go ask your uncle for a loan, and then saying that you are rich because he loaned you some money!
Nobody ever fixed their credit card problems by putting more money on their credit cards. Indeed, it only makes the problem worse.
In the same way, by borrowing money even more rapidly, the U.S. government may have put off economic problems for a time, but by doing this they are making the ultimate day of reckoning even worse.
The truth is that all of this government borrowing and spending is going to wreck the U.S. dollar.
It is impossible to flood the money supply with liquidity without causing rampant inflation, but that is exactly what is in the process of happening.
Take a look at the chart below. It is a chart of the growth of the U.S. money supply. Since the 80s the money supply has been moving upward rapidly, but pay particular attention to the very end of the chart. That is this year. The money supply is absolutely skyrocketing.....
So what happens when you have much more money for the same amount of goods and services?
Now it hasn't quite kicked in big time yet. Many Americans are noticing that prices have gone up here and there, but eventually the type of inflation that is going to kick in is going to be mind blowing.
And it will affect everyone. You see, inflation is like a tax on everyone and everything. When you go to the store and a loaf of bread costs ten dollars, will you be able to buy as much?
No, of course not.
Your money will be worth less.
All of the hard work you put in to scrape together some money will have been devalued.
Your "wealth" will not be worth as much as it was before.
But even in the midst of all of this government spending and the rapid expansion of the money supply, hundreds of thousands of Americans are still losing their jobs every month, and U.S. banks are failing at a record clip. The chart below shows U.S. bank failures during the past few years.....
So what about 2009?
Well, CNN is reporting that 89 banks have failed so far in 2009.
We still have about a third of the year to go.
So just imagine what the chart above will look like at the end of this year.
This is a total economic meltdown folks.
We should have listened to Ron Paul.
But instead the American people were stupid and kept electing politicians who piled up a debt that their children and grandchildren would never, ever be able to repay.
The "wealthiest nation on earth" has now become the biggest debtor on the face of the earth.
It didn't have to be this way.
We could have listened to Ron Paul.
But we didn't.