In the run-up to the November elections, both President Trump and Joe Biden, along with their respective party cohorts, are gearing up to give another few trillion dollars in free money to American voters. This vote-buying scheme is being sold as another attempt to “stimulate” the economy. Actually, it will do the exact opposite. Their vote-buying scheme will plunge the economy into even worse straits.
Let’s say that this round of new federal vote-buying largess is $3 trillion. Where is the federal government going to get that $3 trillion? After all, we all know that the federal government does’t have that money hidden under its bed. In fact, it doesn’t have any money hidden under its bed. Before the coronavirus crisis, it was spending $1 trillion more than it was raising in taxes every year.
That $1 trillion in deficit spending was simply being borrowed. Much of that borrowing was from the American people, which means less capital invested in the private sector. That means lower standards of living for American society.
So, where did they get the money in the initial stimulus largess? They simply borrowed even more money, adding those trillions of dollar onto the federal government’s debt load, one that American taxpayers are on the hook for.
A financial straitjacket
But as the debt load continues to get larger, federal officials know that the federal government is enveloped in an ever tightening financial straitjacket. When one consider just the interest on the federal debt, along with the “entitlement” programs, especially Social Security and Medicare, and the ever-growing expenditures of the national-security establishment, the feds are resorting to the time-honored way to finance expenditures and pay off debt — by inflating the money supply — i.e., printing new money, lots of new money.
That’s how they will handle this new stimulus — through a combination of borrowing and inflation. They will, of course, tell people that the welfare is free. But it’s not free. U.S. taxpayers are on the hook for the debt. And inflation of the money supply will reduce the value of the dollar, making most people poorer through a reduction in purchasing power.
Already, there has been a plunge in the value of the dollar. It just fell to a five-year low against the Swiss franc. As a Reuter’s article today put it, “The dollar crumbled on Monday as cracks in the U.S. economic recovery drove investors away from the world’s reserve currency as they increased bets the Federal Reserve could flag another accommodative shift in its outlook this week.”
The Federal Reserve
This is what the Federal Reserve does and has always done. That is its mission. It accommodates the ever-increasing spending and debt that comes with a welfare-warfare state way of life. It does that by essentially printing the paper currency that is constantly reducing in value.
That’s why the value of the dollar has dropped, decade after decade, ever since the Fed was established in 1913. The Fed destroyed what had been the finest monetary system in the world, one that the Constitution had established, one based on gold coins and silver coins being the nation’s official money. In the process, it plundered and looted the American people.
Contrary to popular opinion among the mainstream press, there is but one cause of inflation — the U.S. government. By devaluing people’s money, inflation is nothing more than a tax. It’s another way for the government to raise money, in addition to taxation and debt.
The problem, of course, is that most people don’t understand that, Prodded by the mainstream media, which itself doesn’t understand the process, people inevitably end up blaming those who are raising their prices in response to the devaluation of the currency.
Inflation and chaos in Lebanon
History is filled with examples of nations that have gone bankrupt as a result of out-of-control spending and debt. A good example taking place right now is Lebanon, where the value of the Lebanese pound, long set at 1,500 to the dollar, has plunged to 7,000 to the dollar, a drop from 4,500 from last April. As of last spring, inflation had reached 50 percent to 60 percent, compared to 5 percent last year.
According to an April 28, 2020, article in the Washington Post, “Lebanon faces its most severe economic crisis in decades, and it has been worsening since September…. Violence escalated Tuesday in the northern Lebanese city of Tripoli as protesters angered by the collapse of the country’s currency and spreading economic upheaval burned down a series of banks and countered volleys of tear gas by pelting security forces with stones.”
A June 26, 2020, Washington Post article states, “Lebanon’s currency hit new lows Friday as the country’s financial and economic collapse accelerated, heralding more misery for the millions of Lebanese who have seen the value of their savings and salaries wiped out…. The currency has now lost 78 percent of its value since October.”
Jad Chaaban, an economics professor at the American University of Beirut, stated, “We have an economic recession that was coupled with hyper inflation; people lost their purchasing power; poverty increased dramatically. So people were just fed up and they went out on the street.”
This is the road that the Trump, BIden, and their party cohorts have set for America. As the new stimulus bill is enacted sending everyone trillions more in free money to voters, just keep in mind how they are financing it. The economic and financial consequences could make what is occurring in Portland look like child’s play.