Obamanomics just won't work Part II

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.

Indeed, the essence of Obamanomics is worse than more of the same old tired Keynesian policies, because through this massive inflation and debasement of the dollar coupled with a proposed foray to commandeer one sixth of the economy through government control over the healthcare industry, and an unimaginable degree of encroachment on economic and personal freedom through the current proposals of Cap-and-Trade, internet regulation, and pay limitations, Obamanomics exceeds even the Keynesian theoretical limitations on government intervention, truly blurring the line between Keynes’ “third way” and socialism. And if Keynesianism, which by its nature requires ever more government intervention and expenditures in an attempt to sustain itself, is collapsing all around us, how violent, then, will that ultimate and inevitable total economic and monetary collapse be once a final and decisive push is made to definitively and irreversibly establish socialism? To be sure, continuing in the direction of mandating more and more government control over that which is best left to individuals will only make matters exponentially worse. A singular “blip” on the radar screen in the form of a fictional 3.7% growth in GDP to demonstrate that the economy is now recovering because of Mr. Obama’s policies, and despite the uncertainty and volatility of the stock market and the certain increase in unemployment numbers, simply proves that the “blip” is a false return, or an echo: they are seeing what they want to see (a clear path to recovery) while ignoring the real storm hidden just beyond the echo.

The hidden storm is the monetary policy of the Federal Reserve, convinced that they can create money and prosperity from nothing. This is simply the modern version of what in the Middle Ages this was called alchemy, the “science” of turning worthless metals into gold. How ironic it is in this day and age of supposed wisdom and advancement that our central bank practices the same “magic” yet with no relationship to gold or any other valuable commodity? Even a worthless piece of metal will be of more value than a bucket full of Federal Reserve Notes if current practices do not soon cease and the Fed causes the dollar to totally collapse. Mr. Obama would be wise to study the economies of Zimbabwe and the Weimar Republic. Mr. Obama’s economic advisors would be wise to study Mises, Hayek and Rothbard instead of Keynes. And all of us, both the current political elites as well as the voting public, would be wise to understand that throughout history the average lifespan of a republic was roughly 200 years before they adopted a suicidal economic policy and descended into tyranny and ultimately total collapse. If history proves anything and current policies continue, we are on borrowed time. It is enough to lead one to ponder whether the further destructive actions of government are not deliberate.