The common result of a government spending more money than it earns is devaluation of its currency. The US government's deficit increased during the Bush Administration. The Democrats and the Obama Admiminstration lifted that deficit to an enormous new level. A common effect of currency devaluation is inflation. In a bad economy, that is going to be a real problem - just ask people who lived through the Jimmy Carter Administration.
First of all, let's spread this blame in a non-partisan fashion. Republicans during the Bush Adminstration years controlled Congress and the White House and they showed no fiscal discipline. The Bush Administration capped this by spending a ton of money in 2008 to try to prevent or curtail the recession - first having a stimulus tax cut at the beginning of the year and then approving the TARP bailout funds - easily a trillion dollars spent last year to prevent the recession.
Now, we have the Obama Administration spending another trillion dollars for a stimulus package, plus a proposed budget that further increases spending. Expectations are that even more spending will follow when Congress sends a Budget to President Obama this year.
Ironically as all the spending of the last two years was going on, the Dollar was getting stronger in relation to other currencies. This was due to two reasons. First, if the whole world is in trouble, the US was viewed as safer than other places. Second, people were bailing out of the stock market in record amounts. So a treasury fund giving a return of positive 1% was better than a stock market fund giving a return of negative 10 to 20 %.
That worm has turned. The Stock Market has stabilized and there is money to be made there. Confidence in the U.S. is eroding as the economy does not turn around. The value of the dollar versus other currencies is dropping. Gas prices, which are tied to US dollars, are going up as the value of the dollar goes down. The cost of raising money to pay for the deficit is increasing.
What does that mean? Higher inflation and higher interest rates - both are just what we don't need right now. Higher prices when people are having trouble getting jobs means people will spend less, which means companies will sell less, which means more job cuts.
Higher inflation means borrowing costs go higher - which will mean higher rates on Adjustable Rate Mortgages and higher rates on credit cards, which means more foreclosures and less home sales. It also means people paying more on interest, which means less to spend on goods and services, which means less sales, which means more job cuts.
Any time the media says this is the worst economy since the Depression, they are wrong. This is a repeat of the economy during the Carter Administration. Ask anyone who remembers those years and what it was like to have 20% inflation and 20% interest rates on mortgages and commercial loans.
It is time for the government to try to stop spending our way out of this problem. We have to bite the bullet and recognize that our economy is changing -- we will no longer be an economy running on home building and consumer spending. No one in the Obama Administration has announced a spending policy based on that fact.
Don't believe me? Read the New York Times' article reporting on the rise of inflation and the devaluation of US currency.
http://www.nytimes.com/2009/05/23/business/economy/23dollar.html?th&emc=th
First of all, let's spread this blame in a non-partisan fashion. Republicans during the Bush Adminstration years controlled Congress and the White House and they showed no fiscal discipline. The Bush Administration capped this by spending a ton of money in 2008 to try to prevent or curtail the recession - first having a stimulus tax cut at the beginning of the year and then approving the TARP bailout funds - easily a trillion dollars spent last year to prevent the recession.
Now, we have the Obama Administration spending another trillion dollars for a stimulus package, plus a proposed budget that further increases spending. Expectations are that even more spending will follow when Congress sends a Budget to President Obama this year.
Ironically as all the spending of the last two years was going on, the Dollar was getting stronger in relation to other currencies. This was due to two reasons. First, if the whole world is in trouble, the US was viewed as safer than other places. Second, people were bailing out of the stock market in record amounts. So a treasury fund giving a return of positive 1% was better than a stock market fund giving a return of negative 10 to 20 %.
That worm has turned. The Stock Market has stabilized and there is money to be made there. Confidence in the U.S. is eroding as the economy does not turn around. The value of the dollar versus other currencies is dropping. Gas prices, which are tied to US dollars, are going up as the value of the dollar goes down. The cost of raising money to pay for the deficit is increasing.
What does that mean? Higher inflation and higher interest rates - both are just what we don't need right now. Higher prices when people are having trouble getting jobs means people will spend less, which means companies will sell less, which means more job cuts.
Higher inflation means borrowing costs go higher - which will mean higher rates on Adjustable Rate Mortgages and higher rates on credit cards, which means more foreclosures and less home sales. It also means people paying more on interest, which means less to spend on goods and services, which means less sales, which means more job cuts.
Any time the media says this is the worst economy since the Depression, they are wrong. This is a repeat of the economy during the Carter Administration. Ask anyone who remembers those years and what it was like to have 20% inflation and 20% interest rates on mortgages and commercial loans.
It is time for the government to try to stop spending our way out of this problem. We have to bite the bullet and recognize that our economy is changing -- we will no longer be an economy running on home building and consumer spending. No one in the Obama Administration has announced a spending policy based on that fact.
Don't believe me? Read the New York Times' article reporting on the rise of inflation and the devaluation of US currency.
http://www.nytimes.com/2009/05/23/business/economy/23dollar.html?th&emc=th
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