This should surely make everyone proud to be an Uhmerikan:
Bush’s certain signature would boost the government’s debt limit to $7.38 trillion, enough to let it borrow money until sometime next year.The Treasury Department had warned it needed the extension by next week “to preserve the confidence in the U.S. government and to prevent uncertainty that would adversely affect our economic recovery.” The current $6.4 trillion limit was breached earlier this year, and Treasury paid its bills by shifting money from government retirement and other funds, maneuvers it said it could not make again.
You’ve probably heard news of tax cuts and the like, making everyone smile because they have more paper to throw around. What the hoi polloi don’t understand is that Ze State is still spending money, money that does not exist. That is called deficit spending. There are two ways to finance the State: one through taxation (outright theft) and the other: inflation (printing more ducats which destroy the value of the currency currently in circulation).
While you are sleeping, the printing presses in D.C. and mints in Denver are busily printing and coining “money.” You go to bed with your piggy bank sitting next to your Desert Eagle cocked and loaded, ready to ward off any would be thief. However, the thief never comes and you wake up with an unscathed piggy bank whose contents is worth X% less.
So for instance, there is only $1 million in existence and it resides in your little porky friend (you compress it with a plunger). You fall asleep and the Fed prints another million. You wake up to find that your life savings is still in one place, but it is worth half as much as it originally was (there are a few other factors that go into it as well, but that is the general gist of it).
This inflation (devaluation) destroys more wealth than both taxation and war combined currently. And it is not a partisan issue as the Federal Reserve operates as an independent agency (sort of like the EPA) – actually both “parties” are guilty of manipulating the Fed, so in a way it is a partisan issue. Below is a graph of the M3 money supply for the past 40 years:
And you’re wondering what M3 is, well there is also an M2 and M1:
- M1 is all of the currency, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers checks.
- M2 is M1 plus all of the money held in money market funds, savings accounts and small CDs.
- M3 is M2 plus all of the large CDs. M3 is short-term money (liquid), however CDs do require maturity and some of it is also “indirect currency” like money market funds. M3 is creeping up to the $9000 billion mark and is the “bigger” picture.
So, despite having more paper in your pocketbooks, compadres, your money is becoming worth less and less each passing day (I’m sure your parents have talked about how a gallon of gasoline used to cost a quarter or a loaf of bread used to cost a nickel or a call-girl used to cost…).
In fact, a comical illustration of showing you just how inane central banks are in terms of the money supply, the exchange rate of an Iraqi Dinar was around 3200 to 1 at the end of Saddam’s career. Because the Iraqi central bank has closed shop and because the American politicos have decided to use a Top-Down approach to the Iraqi economy by infusing millions of Federal Reserve Notes into that shaken market, the Dinar is trading at around 900 to 1, the highest level since 1996 (don’t hold your breath hoping that the same will happen to the dollar anytime soon).
And the love doesn’t end there, let’s look back at what I started this post about, The Debt™:
The Outstanding Public Debt as of 23 May 2003 at 09:24:07 PM GMT is: $6.4 trillion. The estimated population of the United States is 291,037,183 so each citizen’s share of this debt is $22,202.33. The National Debt has continued to increase an average of $992 million per day since September 30, 2002! (Debt Clock)
And as the news release above states, the cap has been upped to $7.38 trillion and don’t let anyone tell you otherwise: it will be increased again and again and again… Oh, and don’t forget the unfunded Social Security debt which adds another few trillion to the debt (seriously, don’t talk about it, some old people might beat you with a cane).
So, the debt grows each day, the dollar devalues each day and for some reason, absurd as it may be (I had to throw something existential in there), politicians and pundits are blowing hot air about “tax cuts,” something that doesn’t fix the biggest problem: worthless paper money and astronomical debts (one day it will have to paid back).
Talk about not seeing the forest for the trees.
A few pragmatic solutions to help prepare for any sort of bubble bursting, convert your savings into another less-volatile and liquid currency (like a Gold Dinar), or the highly recommended time-honored and well-established: rare Gold, Silver and Platinum coin route. Sure, McDonald’s probably won’t accept them today but at the same time, politicians and the State can’t print them.
Of course, if owning gold becomes illegal again, only outlaws will have gold!