Bitten By Profligacy

October 17, 2009 | Filed Under Anti-Americanism, Barack Obama, Budget, Business, Capitalism, Congress, Democrats/Leftists, Europe, Government, Corruption, Journalism, Liberals, Media Bias, President, Society/Culture, Taxes, Thomas Brewton |

-By Thomas E. Brewton

The dollar edges closer to becoming a third-world currency.

Foreign central banks, suffering from the Treasury and Fed-engineered decline in the dollar’s value, are moving new currency reserve investments from the dollar into Euros and Yen.

Long-range effects on the United States will be bad.

If foreign central banks continue to shift their currency reserves from the dollar to other currencies, the dollar will lose its international reserve currency status, damaging our nation’s future. Interest costs on the national debt will rise, reflecting a higher level of economic risk for foreign dollar holders. To pay higher interest on the national debt, taxes will have to rise, crimping business and depressing employment. Costs of our imports, upon which we came to depend for inexpensive consumer and industrial goods, will rise, because the dollar is worth less on international markets. Those higher import costs will reduce business profits, further constraining creation of new jobs.

These are the unsurprising consequences accruing, among other factors, from President Obama’s flooding the markets with Keynesian deficit spending under his $787 billion special-interest pay-off bill (aka the stimulus program). Needless to say, world currency markets also are spooked, both by the prospect of yet more trillions of dollars of deficit spending to finance National Socialist healthcare, and by business-killing and consumer-depressing pandering to “green” extremists, who lust to regulate energy costs up.

Despite propaganda from people like the New York Times’s Paul Krugman, economic prosperity cannot be created by the secular political state. For that we must rely upon the effects of myriad individual actions. The more those actions are regulated the less the scope for return to prosperity.

Rather than removing constraints upon resumption of business activity that will create new jobs, the Obama administration is waging an ideological war to reduce the United States to third-rank economic and political status.

Democrat/Socialist policies are tailored to keep the economy depressed and unemployment high. Among them: straitjacketing our economy with more and more regulatory red tape, raising taxes on the productive portions of the economy, nationalizing parts of private industry, dictating compensation levels to private business, adding to labor unions’ monopoly bargaining power, imposing tariffs and other trade barriers against our allies in order to protect high-cost labor union jobs, deliberately forcing major increases in energy costs for everyone in order to impose the mythology of man-made global warming, and continually keeping business off balance with threats of yet more regulatory and nationalization programs, along with continual threats of criminal prosecution of business leaders.

Democrat/Socialist economics are the equivalent of trying to pull yourself out of quicksand by employing people to shovel on more quicksand. Instead of dealing with the real problem, Democrat/Socialists attempt to leverage the crisis into more of what got us into trouble.

The nation got into the worst economic recession since the 1930s Depression in a multi-step process. First, Democrat/Socialist welfare entitlements programs, initiated under President Lyndon Johnson, grow far more rapidly than the underlying economy. Second, the Treasury and Federal Reserve have been funding the resulting deficit expenditures with ever-growing debt. Third, Federal Reserve creation of fiat money to fund the deficit expands the lending reserves of banks. Fourth, banks’ increased lending reserves lead them to look aggressively for new loans and investments, a process that tends to lower credit standards. Fifth, encouraged by this flood of excess liquidity, businesses take on more debt to over-expand production, and individuals make consumer purchases far in excess of their capacities to repay the resulting credit card and mortgage debt. Sixth, when resulting bubble sectors of the economy - housing in the recent case - over-expand production and consumers can no longer pay their debts, a recession ensues.

Because of our poor educational system since the 1960s, voters have no clue to this basic economic cycle that is repeated in every recession. Excessive government spending, financed by creation of fiat money, leading to over-expansion of bank credit that encourages speculation and spending beyond our means with borrowed money, culminating in a bubble burst. This was exactly the pattern leading to the Great Depression: creation of the Federal Reserve System in 1913, over-expansion of bank reserves by the Fed that produced, in six years, an increase of bank deposits to double the total accumulated in the entire history of the nation prior to 1920, excessive bank lending and investments that created a false boom in the 1920s, and a bubble that finally burst in 1929.

The president’s actions signal that he, along with the general public, is uncomprehending with regard to the underlying realities of the economy. Instead he believes the remedy for excessive spending and excessive debt to be more Federal deficit spending and programs to make consumers spend even more beyond their means. Their initial stimulus program having signally failed to keep unemployment below the promised 8% level, Democrat/Socialist party leaders are now ballyhooing a new stimulus program that will pawn more of our future for short-term political gratification.
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Thomas E. Brewton is a staff writer for the New Media Alliance, Inc. The New Media Alliance is a non-profit (501c3) national coalition of writers, journalists and grass-roots media outlets.

His weblog is THE VIEW FROM 1776 http://www.thomasbrewton.com/

Feel free to contact him with any comments or questions : EMAIL Thomas E. Brewton

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