It Doesn’t Take a Prophet

March 27th, 2009

About a month ago, I wrote an article on inflation.  Well, the specter of it is rearing its ugly head with this Reuters Story.

China, the largest holder of US debt in the world, doesn’t plan on dumping the dollar, but they have indicated that they will probably not be making as many Treasury purchases.  This is going to force our government to come up with some other way to pay for the President’s massive boondoggle stimulus.  If the largest US debt holder in the world is going to buy less, you can bet that the rest of the world will probably follow suit.  That means, dear readers, that the Federal Reserve is going to have to begin inflating the supply of the dollar to pay for this insanity.

I seem to recall some campaign promise or other about an end to earmarks, and yet the biggest legislation the president has signed to date is loaded with it.  Well, not technically.  Technically, earmarks are generally offered as amendments to other bills.  In this case, all of those earmarks have been written right into the stimulus bill.  Take, for example, House Speaker Pelosi’s (D-California) $30 million project to save San Francisco’s wetlands. Now, $30 million in the grand scheme of things is just pocket change. Unfortunately, the stimulus package is loaded with such pocket change.

Unfortunately, even if China was not planning on paring down its purchases of US Treasuries, we are going to be facing insane inflation when those loans come due.  The principle and interest have to come from somewhere, and if the government did not have the cash yesterday when we bought what we did, how are we going to have it tomorrow when the bill is due?  To pay those debts, the government is going to have to come up with more revenue, or it is going to have to print more cash.  It cannot really tax us much higher without actually hurting revenues, so that really only leaves inflating the supply of money.

Get ready.  It’s going to be a bumpy ride.

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3 Responses to “It Doesn’t Take a Prophet”

  1. Tom |

    I understand what you’re saying, and I vividly remember the “stagflation” of the Carter era. But maybe we’re in a position now where suffering through a period of inflation will be acceptable if it’s necessary to get out of the mess we’re in.

    If we have to spend a huge amount of money to boost ourselves out of this recession, and that appears to be the case, how could the subsequent period of inflation be avoided?

  2. Brian |


    Keynes’ ideas failed in the 30s, and they will fail again now. The worst problem with the Keynesian economic model is that it relies upon a centralized bank in order to make things work (which they don’t really, anyway). A centralized bank is antithetical to freedom because it concentrates unaccountable power in the hands of a few.

    The last time I checked (just a few days ago, actually), our debt was a staggering $11 trillion. According to several sources, present value of the unfunded social security and medicare obligations is between $61 and $75 trillion.

    A little math primer. With our current debt, if I gave you $11 trillion dollars and told you that you could spend it any way you wanted to, with the one caveat that you couldn’t spend more than $1 million a day, it would take you 30,000 years to spend it all. To put that into perspective, civilization has only existed for about 7500 years, give or take. Even the current budget, spent by an individual at a million a day, would take nearly 11,000 years to spend.

    Yet more perspective: the entire Gross Domestic Product (total output of all goods and services) in 2004 was $12 trillion.

    We would do well to remember the words of Samuel Adams:
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen.

    You are a rational, intelligent man. It is obvious from your writing. Perhaps you may understand my confusion at the thought that you would agree with a Fabian Socialist on economic policy. The idea that must die is the one that is codified in law and declares that one man must be injured in order to relieve the suffering of another.

    Leftists (I am not accusing you of being one, by the way) famously and frequently cite Thomas Jefferson’s Danbury Baptist Letter as justification for a great many things I do not believe he intended. Yet, if there was one thing he did intend, it was that government should not undertake religious crusades of any stripe. If anything, those on the left pursue their secular humanist goals with a fervor which makes the Assemblies of God pale in comparison. It is our “moral obligation” to take care of the underclasses, we are told. Can there be any clearer violation of the 1st amendment?

    And because of this religious fervor which has been enacted as law, we have fallen under a debt which will destroy us.

  3. Kevin |


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