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What I wouldn’t do to be able to print my own money. A mint - a mint - my kingdom for a mint. Fortunately or unfortunately, the mint is in the government’s hands. Now, I’m going to be all over the place writing this article, because I just don’t get it. We have a national debt of $12 trillion and we’re going to pile on another $1.56 trillion this year. That means that forty cents of every dollar in the federal budget will be financed with borrowed money. And in case you’re worried, we’re looking forward to more deficit spending until we reach the Promised Land - in 2013. Because by then, we’ll be on easy street and the deficit will shrink to a miserly $700 billion dollars. And since we’re destined to reach those lofty economic heights soon enough - the President and Congress are promising to keep taxes low.
Now, I’m not an oracle - but there is one thing certain about people who owe a lot of money; they love inflation. Aside from repayment, nothing reduces debt like a devalued dollar. Keep human behavior in mind when you think of what the boys in Washington DC and Wall Street are cooking up for the nation’s next economic salvation act. The government and every debt-loaded consumer and company has a vested interest in massive inflation. It’s the cure-all that gets them back to solvency.
To get a feel for what’s coming down the pike, start with their projected deficits - the government no longer bothers to pretend that they have any plans to generate surpluses to pay off the national debt. But don’t panic. The pundits will point out that the deficit is only 11% of GDP. They’ll tell you the deficit is manageable - and it is - it was 20% of GDP in World War II. They’ll manage it alright - the only thing that should keep you up nights is how they plan to manage it.
There is only one remedy for what ails us - inflation. Because then we can eventually have the luxury of running trillion dollar deficits that are only 3% of GDP - not because we’re producing more, but because we managed to deflate the dollar. No other solution is more politically convenient or palatable. From the vantage point of the politicians in Washington - inflation is the lesser evil. What’s worse, cutting back on generous tax credits and controlling spending or trashing the dollar with rampant inflation?
When it comes to inflation - the government will always lie to you. They’ll fix the figures - they’ll tell you that they’re fighting the inflation boogey man with every economic weapon in their arsenal. But just keep in mind they’re the same cast of actors who promised you a strong dollar policy. Any economist worth his salt knows that inflation is far higher than the figures reported by the labor department. Want proof? We are in a deep recession and oil is fetching $70 a barrel, healthcare is increasing at 7% per year, and education has been averaging 7 to 8% increases for decades.