Because They're Allowed To

Lots of things caused the Great Recession we’re in, but the biggest was the subprime mortgage crisis. And what caused that? Government meddling in the housing market, that’s what. Guess we’ll never do that again, right? Wrong. We’re at it again and this time it’s worse.

The full faith and credit of the United States of America - which used to mean something - is getting behind mortgages for up to 150% of what a house is worth. Yes, you read that right. Our brilliant federal officials are guaranteeing mortgages to underwater homeowners for more than their houses are worth! It was bad enough that our government caused the housing bubble by strong-arming banks into writing mortgages to people who couldn’t pay them back. Now that housing prices have tumbled and foreclosures have gone through the roof, our government is propping up what’s left of the housing market by pushing 150% mortgages with all of us on the hook for them.

Oh and by the way: we’re more than $16 trillion in debt. That means we’re the absolutely biggest debtor nation in history and getting bigger by the hour. So what are those geniuses we elected to the White House and Congress doing about this? Furrowing their brows and pretending to do something while making it worse all the time. They keep borrowing, and now 70% of our new debt is “purchased” by the Federal Reserve. For you low-information voters who gave Dear Leader his second term, here’s a little economics lesson:

When the US Government borrows money, it issues bonds. Think of these bonds as IOUs the government gives to people it borrows from. Remember the US Savings Bonds your grandmother gave you for your birthday? Those pieces of paper didn’t represent the US saving anything. They represented the US borrowing from your grandmother and promising to pay back whatever number of dollars it printed on the bonds. They were IOUs with interest. Got that? Our government was going further into debt and Grammy believed it would pay her (or you) back.

Well, that belief about the US Government’s ability to pay back what it borrows has been shaken severely. The rest of the world is nervous about the financial stability of the US Government and you should be too - but clearly you aren’t, or you wouldn’t have voted for the Dear Leader.

When Treasury Secretary Tim Geithner issues bonds, (tries to borrow more trillions of dollars), buyers say “Uh-uh. No way am I going to lend you any more money. Not for that low interest rate.” However, the US Government isn’t about to let interest rates go up because that would hasten its bankruptcy.

So what does it do? It hints to Bald, Bearded Ben Bernanke - Chairman of the “independent” Federal Reserve - that it needs more “Quantitative Easing.” And what the heck is “Quantitative Easing” you may ask? It’s Bald Bearded Ben creating trillions of dollars out of thin air. He’s printing monopoly money. When he denies that the “independent” Federal Reserve prints money, he’s not telling the truth. Oh, technically he’s right. The dollars he’s creating out of thin air are not paper dollars or what we call “hard copy.” They’re digital dollars.

We all know people with huge credit card debt. How did they get there? Did they pass hard-copy dollars when they bought things? No. They used digital dollars. When they reached their debt ceiling, what did they do? They got another credit card and rolled their debt over onto it. Did any hard copy dollars change hands? No. They continued doing this as long as they were allowed to. Let me repeat that: As long as they were allowed to. This is what the US Government is doing through the Federal Reserve - rolling old debt into ever-increasing new debt. How long will they continue doing this? As long as they’re allowed to.

And who allows them? We do.

Now think what would happen if people with huge credit-card debt obtained printing presses that could print dollars - or super computers that could create digital dollars - without going to jail. What would happen to our economy with all that funny money in circulation? It would collapse, right? But that’s what Bald, Bearded Ben Bernanke is going at the Federal Reserve in his third round of printing/creating dollars - that he calls “Quantitative Easing.”

Low-information voters gave us the Ivy-League educated, government leaders who assure us that all this is okay because they know what they’re doing. Barack and Ben must know what they’re doing because they went to Harvard, right? They’re smarter than the rest of us and we’ve put our faith in them, so everything will be all right, won’t it?

Dream on.

The economic mess Dear Leader inherited from Bush is nothing compared to what he’s inheriting from his own first term.

Right Rick

Was Texas Governor Rick Perry out of line to suggest that bald, bearded Ben Bernanke would be almost treasonous to print more dollars? No. I don’t think so. His remarks got a rise out of President Obama right away. Even former President Bush’s advisor, Karl Rove, criticized him. Bush, after all, was first to appoint Bernanke as Chairman of the Federal Reserve, perhaps on the advice of Rove. Obama re-appointed him when he took office and it looks like Bernanke has been doing his bidding ever since.

Speaking in Iowa, apparently in response to an inquiry about the Federal Reserve, Perry said, “If this guy [Bernanke] prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. I mean, printing more money to play politics at this particular time in American history, is almost treacherous, er, or treasonous in my opinion.”Perry at CPAC 2011

When I was born, pennies were made of copper. Dimes, quarters, and half-dollars were made of silver. Even if people were to lose faith in the government that minted their coins and whose images they bear, citizens could still depend on the copper and silver being worth something. Paper dollars could be redeemed for a certain amount of silver or gold back then too. The paper dollar was understood to be the same as the personal check, and they’re about the same size as checks too. When I write a check to someone, he or she must have confidence that there’s enough cash in my account to back it up. I’m instructing my bank to “pay to the order of” whomever, a certain amount of cash. Paper dollars back then were called “silver certificates” which were instructions for government to turn over a certain amount of silver maintained by the federal government for such purposes. People didn’t cash them in for silver as a rule, but were confident they could if they wanted because they trusted their government.None of that applies anymore. Pennies are made of zinc with copper paint. Dimes and quarters are made of copper with silver paint. The paper dollar cannot be redeemed for precious metal anymore either - in any amount - unless you choose to buy gold with it from a private dealer. Not too long ago, you could buy an ounce of gold for about $40. At this writing, it would cost over $1800 and by the time you read this in a newspaper in a few more days, an ounce of gold might cost over $2000. Why? Several reasons, but mostly it’s because people don’t trust the US Government as much as they used to. Why not? Because Ben Bernanke has been printing trillions more dollars without putting any more gold or silver in Fort Knox to back it up. Why is he doing that? Because he can. Why can he? Because President Nixon took us off the gold standard in 1973. The amount of dollars isn’t tied to the amount of gold in Fort Knox anymore. It “floats,” say the economists.

A February, 2011 article in the newsletter Imprimis compared “floating” the value of the dollar with “floating” the weight of a kilogram. Seth Lipsky wrote that “a global scramble is under way to define this most basic unit after it was discovered that the standard kilogram—a cylinder of platinum and iridium that is maintained by the International Bureau of Weights and Measures—has been losing mass.”

Then he asked why not just let the kilogram float like the dollar? “After all,” he wrote, “when you go into the grocery to buy a pound of hamburger, why should you worry about how much hamburger you get—so long as it’s a pound’s worth? A pound is supposed to be .45359237 of a kilogram. But if Congress can permit Mr. Bernanke to use his judgment in deciding what a dollar is worth, why shouldn’t he—or some other Ph.D. from M.I.T.—be able to decide from day to day what a kilogram is worth?”Lipsky described how the Second Congress “established the value of the dollar at 371 ¼ grains of pure silver. . . . [and] did not expect the value of the dollar to be changed any more than the persons who locked away that kilogram of platinum and iridium expected the cylinder to start losing mass. In fact, in this same 1792 law, they established the death penalty for debasing the dollar.”We should demand a rubber glove and KY jelly at least

The death penalty? Hmm. That was the punishment they established for anyone committing treason as well. That's how seriously the Founding Fathers (many of whom were in Congress at the time) took their constitutional power to coin money.

Tea Party conservatives know the US dollar isn’t floating. It’s sinking, because Bernanke is printing them wildly. Those of us who have saved up dollars are losing wealth with every dollar he prints - and all that hard-earned wealth is going down the black hole of the federal government. It’s a hidden tax. Bernanke calls his money-printing “quantitative easing,” but it could also be called counterfeiting. It’s linguistic legerdemain for theft by a federal government which is driving America into bankruptcy.Maybe Bernanke and the president who appointed him think printing money is good for the economy and will save America. If they do, they’re both fools. If they don’t believe it, they’re intentionally sinking our ship of state along with our dollars. Tea Party conservatives like Perry see the practice as foolish at best and treasonous at worst.

Governor Perry is entitled to his opinion that it’s the latter.