It’s time to face facts: the national government is broke. The following chart is from the website of the Federal Reserve. It shows federal expenditures (blue) compared to federal tax receipts (red). The difference between the two is, of course, the federal deficit, which has ballooned to truly historic proportions.
Clearly, the path we’re on is unsustainable. If we don’t restore sanity immediately our financial credibility in the world will be destroyed. Yet, Congress just passed a national “Health Care” measure, one they claim is spending-neutral. I leave it to you: has Congress EVER passed a bill creating a new entitlement that was spending-neutral?
Around 2001 we had a recession, which you can see on the above chart. You can also see that tax receipts plummeted. In response, then-Fed chairman Greenspan lowered interest rates thirteen times in order to boost the economy, which of course also boosted tax receipts. And while the Fed can make credit cheaper, they can’t decide where it goes. The credit went into housing, inflating the housing bubble that exploded in 2007.
But this time, interest rates are already at zero, so in order to blow another bubble Fed Chairman Bernanke has begun printing money. The next chart, also from the Fed, shows growth in the monetary base:
In finance, charts that look like this are called “hockey sticks”, and they always show a situation that is unsustainable and that will end in catastrophe. If we don’t stop them, Congress and the Fed will destroy the dollar.
Where did all of Bernanke’s new money go? Straight to the banks’ reserves, and interest-free:
It makes no sense at all to be paid small amounts of money for a day’s labor when vast quantities of that same money are effortlessly clicked into existence at the whim of one man. It makes even less sense to work for a living when the banks get free money, our money, which they then loan back to us at 5%, 8%, even 20% or more.
Think about it: if all of this “new” money has value, why doesn’t Bernanke just print up $100 Trillion or so and we’ll all stop working? And if it doesn’t have value, what good is it? Who do they think they’re kidding?
I think it’s fairly obvious that the people who believe they’re smart enough to manage the economy are no smarter than the rest of us and are, rather, less so. We must stop the fiscal madness now!
