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Within 24 hours of this debt resolution sailing through the Congress, over 350 billion dollars were borrowed—and the government’s debt now officially stands well over 17 trillion. This is to say nothing of the untold trillions of dollars in unfunded liabilities the American taxpayer is expected to cover well into the future. As staggering as these numbers may be, very few in Washington DC understand the magnitude of this national dilemma.
This predicament grows even more dangerous once another little known fact is revealed. The trillion dollar deficits our government is continuing to spend are no longer coming from real “borrowed” money. The Chinese are no longer lining up to purchase American treasury bonds, and lend our government their savings. Despite popular opinion, very few foreigners are loaning money to the American government now. So where is all of this “borrowed” money coming from in Washington?
Over the past several years, the largest buyer of American debt has now become the Federal Reserve, our country’s central bank. To permit the federal government to desperately cling to spending money it doesn’t have—last year alone, the Federal Reserve purchased over 75% of all US Treasury bonds. What does this mean?
To be clear, the Federal Reserve has zero resources at its disposal. So when the Fed steps in as the “lender of last resort”, and buys US government debt, new dollars are being created out of thin air. In essence, the only thing the Fed does have at its disposal is the printing-press, and this has become the new norm in Washington DC. The printing-press is running at full-speed ahead. Since 2008, trillions of new dollars have been “printed-up” to lend to the federal government, as well as to finance large, politically-connected banking institutions—in order to maintain some semblance of “solvency”. Wall Street is booming, and so is Washington.
Turning to the printing-press though is a dangerous notion, and a perilous path Washington DC has set its sights on. But this is nothing new. History is ripe with various government regimes utilizing the printing-press as a means to grow government power. For the average American though, this massive devaluation of the dollar has real consequences. The reality of this boom on Wall Street and in Washington DC is not prosperity—but just the opposite. It represents poverty to the average American, because as more dollars are printed-up by the Federal Reserve, the average American will find that their purchasing power will go down. This can already be seen—at the grocery store or the gas pump—prices simply go up on the necessities, and well before any raises can be given out to the hard working men and women of this country. In a way, this represents a tax. The inflation tax.
Day by day though, the federal government is growing insolvent—and even though the Dow Jones on Wall Street may be at an all-time high, this money-printing scheme must eventually come to an end. Our current economic well-being hinges on it. If we fool-heartedly believe that deficit spending should continue, that interest rates should be forced to nothing, simply by the printing press—that savings are no longer required, that savings should actually be penalized—we will simply prolong the day of reckoning.
It is not too late to stave off the consequences of these reckless actions—but these horrific ideas of mounting deficits, and “monetary easing” must come to an end. Interest rates must be allowed to rise, and reflect what the market can supply and demand. And of course, higher interest rates force our ignorant leaders in government to slow their spending binge. But above all else, serious reductions in government spending must take place—else economic ruin will transpire. Though economic times are indeed uncertain, one thing is not. If Washington DC continues the path of money-printing and deficit spending, the American people by-and-large will face grave hardship. History does not sugar coat this result.
Pat McGeehan is a Republican candidate for the US Senate. He is a graduate of the US Air Force Academy, and a former member of the WV House of Delegates. Pat is the author of the book Printing Our Way to Poverty. For more information, please visit www.SaveWV.com.