Tuesday, February 10, 2009

Scary Idea

The U.S. Senate today passed a “stimulus” package priced at $838 billion.  We have to fix everything.  If we had failed to pass this bill, we would have wrecked the economy.  Oh, wait, that was the $700 billion bailout bill last fall.  It was going to fix everything.  But now we need to spend even more money to get our economy moving forward again.

If borrowing money for the government fixes everything, then why stop at 700 + 838 billion?  Why not just borrow $10 trillion?  Just think of all the executive bonuses we could give, and “stimulus checks” we could all receive in the mail!

Where does this money come from?  Someone has to buy the U.S. treasury bills – bonds that must be repaid with interest.  But what happens when no one wants to buy them?  After all, someone so severely in debt as Uncle Sam can barely pay his minimum payments.  Why would you risk lending him more money? 

As the global financial markets shy away from purchasing T-bills, we are left with no alternative but printing money.  Then we will see a certain escalation of prices, with too much cash introduced in our money supply.

The idea is that “only government” can fix our problems.  And the only way it can fix the problem is with borrowed money.  Something is wrong with this picture.  It is a scary thought that only government can make things right.  It is even scarier when they plan to do it with money borrowed for generations in the future.