Dose of Clarity

In an attempt to kick-start our struggling economy that has been suffering from this formidable global slump, our Government has been pumping money into the system relentlessly with no end in sight. To accommodate this spending debauchery they are embarking on a program of borrowing and of printing money in some coordinated effort to cover the absurd level of capital needed. The borrowing of money will soon show signs of declining interest as foreign sources of capital start investing elsewhere to reduce their exposure to our excessive needs as we knowingly overextend ourselves. The printing of money presents the downside of creating widespread inflation that will not be a very desirable consequence in our economy. Both methods will have an inflationary tendency, but printing the money will vastly accelerate it once the velocity of transactions increase, and it will be exacerbated by the Federal Reserve being late on extracting the excess capital injected upon this occurrence, thus creating the impetus of the next recession that will be created to deal with runaway inflation.

The focus of raising the needed funds will surely be centered on borrowing from foreign sources until their lending appetite is exhausted, and then the difference will be covered with printing. It makes you question whether it is better to borrow or print since the foolish decision has apparently been made to spend what we do not have. Borrowing money right now can be done at very favorable rates, but it will have to be paid by taxpayers in later years to include future generations that had no responsibility in the decisions creating it. It is difficult to view this generational theft as anything but morally wrong. On the other hand, inflation created by excessive printing of money is suffered by the very citizens that are currently responsible for this Government’s decisions via the voting booth. By directly affecting the pockets of the current voting public it creates the potential to force some discipline back into the system as the suffering proliferates. Many of the programs that are leading to this unprecedented governmental spending can be reversed with pressure from the current voters, and it is their responsibility to do such or suffer its consequences. Inflation is an evil tax on purchasing power that is effectively a tax on everybody through higher prices of the goods and services in our economy. From a taxpayer point of view this might be the lesser evil versus debt because everyone is sharing the burden of higher prices instead of only taxpayers suffering the burden with repayment of governmental borrowing. That is unless we magically find a way to produce our way out of the deficits, but let’s not hold our breath for that to happen. The burden of excessive spending must fall on either those responsible for it or to a future generation that will have to produce and tax their way out of it. To borrow or to print is a false choice being presented, the right answer is neither, but I think America has proven its inability to take that path.