Which is a strange trick, and best not tried at home:
What comes after the United States ceases to be the central point of free-market economic power? We may shortly get the answer to that question. As the United States increases its borrowing for greater government spending, willing buyers of American bonds increasingly grow more scarce, and the “full faith and credit” of the United States will soon lose its cachet as the rock-solid foundation of the international market.
Warning signs abound. Earlier this month, the Treasury discovered that demand had significantly decreased for its long-term bonds. In order to get buyers at its regular auction – the device by which the United States runs on deficit spending – it had to hike the interest rates it pays the bondholders. It signaled a lack of confidence in America’s ability to sustain its debt expansion, which has the effect of worsening it through heavier debt service payments on the bonds they managed to sell…
…Right now, the United States has responded to a lack of demand for its Treasuries through a questionable and disturbing method: we’re buying our own debt. That allows the yields to remain low, but buying our own debt is somewhat akin to creating your own credit card. Eventually, you have to acknowledge that the money you create on the books never really existed, unless the United States plans to simply print money to pay off all the bonds. That would create a level of inflation not seen in the West since the Weimar Republic, and will effectively force the rest of the world to avoid U.S. currency and investments as unsound. It would, for the first time in decades, put the United States on the financial sideline.
Will we have hyperinflation? I’m not ready to make such a prediction, but something eventually has to give – either we have to have a sudden and massive reduction in government spending in the next couple years, or we’re going to have to print money until we’re able to depreciate our currency to the point where hyperinflation results. This is bad news – and the worst part about it is that we’re doing this sort of nonsense just so President Obama and his Democrats don’t have to face up to the fact that the tax-and-spend, New Deal party is at long last, over. We spent and spent and spent, and now its time to reap what we’ve sown – a generation of stringency, if not abject poverty, while we build our self out of the hole we’ve dug. The sooner we face up to our bankruptcy the better – and the less painful it will be.
We have to stop being afraid of big banks and other big corporations failing; we have to draw together and dedicate ourselves to hard work and frugal living while we right the wrong we’ve done. We have to genuinely make the hard choices and go for the real change which Obama and Co talk about, but have not the slightest inclination to do. We can do this – we can retrench and still ensure national defense, law enforcement, basic health care, education and infrastructure…but it means that millions of government employees will have to be let go, thousands of do-nothing groups will have to be cut off from the government teat, millions of people who currently slide by on the government dole of one type or another will have to start doing productive work. It will be hard, but it will be salubrious – and it will fix the problem.
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