Deficit spending means a debt owed to someone, whether it is owed to a foreign entity or to ourselves. Money borrowed must be repaid. Selling trillions of dollars in Treasury bonds to China or to anyone else means we are borrowing with the understanding that we will repay the debt. Ultimately, if the spending becomes too reckless, our lenders will begin to seriously question our ability to pay, and to express concern over the falling dollar with which they will be repaid. After all, what good is being repaid on a debt when what you are being repaid with is essentially worthless? Where Obamanomics is such a radical departure from Keynsianism is the size of the deficit – it is virtually inconceivable that it will ever be paid back. The rhetoric coming from the president and his administration that such spending and deficits are “unsustainable” and ”unacceptable” ignores the fact that they continue to spend and increase the deficit with even more programs and projects, all the while declaring that this is the most certain path to full recovery and “sustainable job growth,” etc., etc… It is all utter nonsense.

To be fair to Mr. Obama, those who blame him in full or in part for creating the “Obama Recession” are as foolhardy as their counterparts who blame Mr. Bush. One must also understand that had Mr. McCain been the current occupant of the White House, the situation would be very much the same because of the prevailing mentality among the political elite that only government is big enough to solve such dire economic problems. And, while the actions taken by both Mr. Bush and Mr. Obama have certainly contributed the worsening of the situation over the long term, neither one bears full blame for its cause. They do, however, deserve blame for failing to clearly see the best path toward a solution, which is letting the natural laws of economics and human nature work instead of propping up a bubble with fiat money and regulations aimed at benefiting the politically well-connected to the detriment of everyone else. Bad regulations and monetary policy brought us to this place, and more of the same is quite obviously not going to help. Whether the entities favored by the proposed new regulations and legislation are big Democrat donors or big Republican donors is immaterial. Those with money and access to power will benefit to the detriment of the rest of us, no matter how flowery the language of “hope” and “change.”

According to the AFP, Mr. Obama “stressed that the actions taken by his government had ‘helped to stem what could have been a disastrous situation for the economy,’ adding that ‘we are starting to see stabilization and indeed some improvement.’” Accordingly, one might be inclined to argue that ballooning the national debt to $12 trillion, and attempting to force passage of a national healthcare bill along with a Cap-and Trade tax bill piled atop of unfounded – and unfundable - government obligations already at $106 trillion is the actual disaster. Indeed, the vast majority of the blame for that unfundable debt of $106 trillion does not belong with Mr. Obama but, rather, with his predecessors going back to President Johnson. Regardless of who gets the blame, however, is the sad reality that the figure of $106 trillion is proof that these government obligations are inconceivable to the rational mind, and adding the current U.S. national debt of $12 trillion to this figure simply makes the further point that the government itself is insolvent, because even if every man, woman and child in this country were taxed at 100% for a decade, that amount could never be paid off. Hence, Mr. Obama defers to Mr. Bernanke’s strategy of monetizing the debt and massively inflating our currency in doing so – the epitome of Keynesian theory. Sure, the Treasury will be able to pay off the numerical figure of its’ trillions in debt bonds with “dollars” created out of thin air, but those dollars won’t be worth anything by the time that happens. Massive inflation only benefits the party who has to pay the debt. Everyone else suffers.  (Continued...)

Early on in his book “End the Fed” Dr. Ron Paul makes the following statement: “Everyone should have an intense interest in what money is and how it is manipulated by the few at the expense of the many. Money is crucial for survival. It is necessary for maintaining a free society. A healthy economy depends on it. Limiting political power is impossible without it. Sound money is essential for preventing unnecessary wars. Prosperity and peace are impossible in the long run without it. To understand money, one absolutely must understand what a central bank is all about. In the United States, the central bank is the Federal Reserve, the instrument by which our money and credit are constantly manipulated for the benefit of a privileged few.” (End the Fed, pp.3-4).

Here is a question to begin with: Have you ever really thought about why we need to have the FDIC (Federal Deposit Insurance Co.) if there is nothing wrong with our banking system? We always assume that whenever we wish we can just show up at a branch of our bank and slip our card into the ATM or write a check and we can withdraw as much of our money as we want, even up to the total sum we have deposited. After all, we’ve always assumed and been told that when we open an account, say for example a demand deposit (standard checking account) that the money is there for our use, that it is obviously ours, and that we can demand its redemption at any time, without notice. We’ve either been told or led to believe that once we deposit our money in a bank it is there for safe keeping, until such time as we, it’s owners, should decide to utilize it for whatever purpose we should choose. If this is indeed so, then why would we ever need the FDIC to insure our money, now up to $250,000 per account, if it is just being stored there in an account? This is one of those things that ought to raise a red flag, because although on the surface it seems benign, once one scratches even a little bit below that surface one soon discovers a mountain of evidence that only leads to more questions, and one of the best-kept open secrets of all time. What is that secret? The secret is the fact that our banks are inherently insolvent. The reason is called fractional reserve banking.  The primary culprit is the Federal Reserve.  (continued...)

The writing has been on the wall for some time now, and over the last several months there have been many none-too-subtle hints from China, France and a host of other nations about what they think of the dollar. The recent G-20 meeting in Pittsburgh was very much a consensus on abandoning the U.S. dollar as the world’s reserve currency and creating a new global reserve currency. Many scoffed at the viability of such an undertaking, declaring it to be unattainable, but anyone who has been paying attention to what our own Federal Reserve has been doing, who has grasped an even cursory understanding of the history and theory of money, and who has been observing what the other members of the G-20 have been quietly up to were not surprised by today’s announcement that the Arab gulf states, China, Russia, France, Japan and others are planning to divest themselves of their U.S. dollars and end all dollar transactions for oil.

This is a monumental and historic change in global monetary policy, and could soon prove devastating to the dollar. Indeed, it begs the question: will the dollar collapse? Unfortunately, the possibility is becoming increasingly likely despite the pictures of rainbows, sunshine and lollipops emanating from top policymakers, central bankers and analysts in and around Washington and New York. This is most unfortunate because very many people in this country stand to be completely blindsided by these unfolding events and just about the only source for information is foreign press. Too many Americans are right now under the illusion that the “recession” is all but over, that we are in the process of a “jobless recovery” and that our continuing to spend trillions of dollars that we don’t have is of no consequence because the Federal Reserve knows exactly when to begin reducing the money supply to stave off any harmful inflation. There are several serious problems with this entire situation that warrant attention.  (continued...)

The favorite U.S. financial cocktail of fiat currency, inflationary monetary policy, and massive deficit spending that has been the staple of U.S. economic policy for decades could soon result in a hangover that the dollar might not survive. Already new concerns are being raised as to what might happen is China and Japan refuse to continue buying U.S. debt. Tiger Management founder and chairman Julian Robertson told CNBC: “It's almost Armageddon... (more here...)

In a speech aimed at further demonizing Wall Street by once again failing to accept that government also bears responsibility for the much of the ongoing financial meltdown, President Obama declared, “I have always been a strong believer in the power of the free market. I believe that jobs are best created not by government, but by businesses and entrepreneurs willing to take a risk on a good idea.”

It is one thing to utter such words in a speech, and yet something entirely different to put them into action; and to date, all of Mr. Obama’s actions relative to the economy have been wholly manipulative and hostile to the idea of free market capitalism. To be fair, Mr. Obama is certainly not alone in his hostility toward true free market capitalism, for since the inception of the Federal Reserve in 1913 U.S. economic and monetary policy have been overwhelmingly interventionist and inflationary, building an faux economy with a fragile basis in easy money, easy credit, fiat currency.  (continued... examiner.com)

On March 18 in an almost perfectly orchestrated sequence of events that make conspiracy theorists like myself froth at the mouth, while the vast majority of Americans were obsessed with the feigned “outrage” by Congress over $165 million in bonuses paid out to AIG executives that they (Congress) themselves knew of and apparently approved in their passing of the co-called “stimulus” bill that not one of them read prior to voting on, a far more important and potentially catastrophic event took place almost without notice. Only a few patriots bothered to report it, and among those who did even fewer either bothered or were able to adequately and accurately explain it's meaning for us and for the future of our country.

What it means to say that the Fed's balance sheet assets will increase from $1.9 trillion to $4.5 trillion must be understood in the proper context, that being, that the neither the Fed nor the government has anything close to $4.5 trillion with which to purchase any assets. The reader will recall that the Treasury has been conducting auctions on a regular basis whereby it auctions off U.S. debt to whoever will buy it. And, just recently, Secretary of State Clinton made a special trip to China to assure them that the U.S. will make good on it's debts held by foreign entities and encourage them, particularly the Chinese, to continue to purchase U.S. debt. Considering that the U.S. government is in fact bankrupt, in order to embark on this bold new policy endeavor, the Fed will print $1 trillion dollars now, and certainly more later, with which it intends to purchase said “toxic assets.”

Through means of vastly increasing the amount of currency in circulation by printing it literally out of thin air, the dollar must necessarily become grossly devalued, its purchasing power will be greatly reduced and the unfortunate result will be hyperinflation of the kind mentioned in the examples above.

If allowed to continue, this policy will ultimately result in the total collapse of our monetary system, likely followed by a collapse of government. What will follow next is any body's guess. It is most unfortunate that those who currently wield political power so stubbornly cling to the same failed theories of interventionism that they predecessors also clung to. Indeed, at present how many times have we been told by those in Washington that because the current financial situation has deteriorated so rapidly that it is necessary to “change” capitalism in order to “save” it.

The fact of the matter is that we are in this current financial mess because they have already “changed” it. What was changed from the first half of the 20^th century was the almost universal adoption of a policy of active interventionism by western industrialized governments, based upon the misguided and now disproven theories of Keynes. Interventionism, it was posed, was to be neither true capitalism nor true totalitarianism, but rather, “as a third solution of the problem of society's economic organization, stands midway between the other two systems, and while retaining the advantages of both, avoids the disadvantages inherent in each.”³ In fact, all that interventionist theory has really accomplished is the mass deception free peoples, and the unsubstantiated and wholly unrealistic promises of “lasting prosperity” or “permanent” prosperity. An appeal to common sense would instantly reveal the impossibility of a permanently prosperous economy as the interventionists would define it.

In a very general sense, interventionism means government meddling or coercion upon the various aspects of the economy in order to effect specifically desired results. An example of a desired result is the buzz-word, “total employment,” sought by the governments of almost all industrialized nations whereby the government over-regulates and thereby influences various industries by a variety of means to “stimulate” the economy along a path of what it hopes to be a permanent state of growth, production and consumption. Yet what is missed by so many supposedly brilliant economic minds is the inescapable fact that wherever government intervenes, whether by passing mandatory “living wage” laws, price controls, or whatever, the immediate effect is to artificially raise the costs of production – and therefore raising the costs of the goods produced for consumption - above what the unhampered market (you and I) would wish to pay. If the price of the good becomes too high and consumers buy less of it, the costs of the producer increase further and ultimately end in higher unemployment. Thus, the means employed are entirely self-defeating relative to the intended goal. The law of unintended consequences thus manifests itself – what the interventionist policy sought was higher employment, but what resulted was higher unemployment.

Typically this result prompts even further interventionism on the part of the government as it seeks to correct the unintended consequence of the original policy. For example, in the case of price controls, the next move may be to decree that as the cost of the good to too high to attract consumers, then the price of the good will be fixed even lower. This still leaves high costs for the producer, who will be forced to either go out of business (because his revenues do not exceed his costs) or to seek redress from the government. Again, the typical response from government would likely be to fix the costs of those commodities employed in the production of the good to be produced. However, it becomes immediately apparent that the size and scope of the original policy has just been expanded instantly and exponentially, for in fixing the price of these commodities the government must continue fixing prices of others and mandating more and more controls over many aspects of the overall economy. Thus, interventionism, if not abandoned when the law of unintended consequences becomes apparent, must always lead to increased bureaucratic control incompatible with free market capitalism.

A worse form of interventionism, however, is the one that has been employed by the Federal Reserve since its creation in 1913: the policies of so-called “easy money.” The name is an irony in and of itself, for in the end there is nothing “easy” for those who suffer the results of massive credit expansion (creating money out of thin air), deficit spending, and inflationary monetary policy. Indeed, the fundamental underlying cause of the current fiscal crisis, and the thing that has enabled all of the other factors to come together to form this perfect economic storm that threatens to bring this nation and possibly the world to its knees is these misguided interventionist policies of massive credit expansion and inflation. And now, as the nation waits for results of an ill planned and mostly ineffective “stimulus” bill to be manifested, the Fed has been loaning money to banks, buying debt and printing money behind the scenes, almost unnoticed. What they do now, they do in relative obscurity, but the effects of their actions will certainly be felt in the years to come. With trillions upon trillions of dollars being newly created, printed, and injected into the financial system the short term effect may well be a temporary recovery. The effects of the massive inflation that will result have yet to be accurately estimated, as nothing on this scale has ever been attempted. The closest situation to ours was Weimar Germany, and the results, as we know, were not good. Inflation is bad policy to be sure. Just how bad it will ultimately be, and how devastating effects will be remain to be seen.