Money Makes the World Go 'Round

Our nation has a mountain of debt. We have an eruption of debts. First, in just the last 12 months, the U.S. federal deficit leap frogged from $454.8 billion in fiscal 2008 to $1.58 trillion in fiscal 2009, which just ended a few months ago.

Second, we’re witnessing a sea change in the global economy. When government experts talk about the "national debt," they refer to the funded debts — which the U.S. has issued securities like Treasury bills or agency bonds. But, the problem goes beyond that. Washington has another $104 trillion in unfunded obligations. They are: Social Security, Medicare, Medicaid, Veteran’s benefits, government pensions. That means for every one dollar of debt on the balance sheet, there are nine dollars in debts not counted.

So, is the the government going to take measures to make the debts go away? Haven’t they already taken radical steps? They bailed out Bank of America, Citigroup, Merrill Lynch, and AIG. Trillions handed out in loans and credit guarantees. Congress gave the Fed new superpowers. Mr. Bernanke and Mr. Geithner are claiming victory. They say the crisis is over and those extraordinary measures were necessary. What did they accomplish? They have indeed eased the debt crisis, by creating another crisis, the dollar crisis, which is just beginning.

We’ve got the officially recognized national debt at $11.8 trillion. Unfunded national obligations of $104 trillion. $9 trillion in cumulative deficits over the next ten years. Plus, another trillion dollars for health care reform, no matter what bill finally makes it through Congress.
Grand total: $125.8 trillion.

You kiddies may not remember Senator Everett Dirkson from Ill. At a press conference he said, "A billion here, a billion there, and pretty soon you're talking about real money!" It was not until the previous administration when the "T" word was introduced into our fiscal accounts.

The White House admits looking down the road of one-trillion-dollar deficits for years to come. (2015 & beyone?) That’s why no matter how you shake the dice, this pile of debt will never be paid off, --- other than some form of default. We know there are two ways a government can default; first, stop paying its bills and obligations. That’s highly unlikely. The second is to default on the sly, paying off creditors with something cheaper. Cheaper dollars that have less buying power than today’s dollars.

Last year, when the U.S. economy was in the credit crisis, Bush and Bernanke spent sums the government didn’t have. Borrowed and printed money that lead to a future erosion in the value of our money. This year, faced with similar choices, Obama and Congress did the same. They spent hundreds of billions of TARP money, passed a second stimulus bill AND a $300 billion omnibus spending bill. Just for laughs, they bailed out the automakers.

Two different presidents — one, Republican, one Democrat — chose the same method. The only politically path, the easy way out. Both chose to fight impending depression by borrowing and printing money. Both knew this set us up for a more devastating future crisis, the crisis of the dollar. It's called inflation, and we will feel it after Christmas. Happy New Year, folks.