CJReport

The federal government has spent trillions of dollars over the past year to fight the current economic crisis this country is in. Although many people believe the worst is over, how is this country going to be able to finance the massive amount of debt?
The government can raise money in three ways. They can tax it out of the American people. They can borrow it by selling treasuries and promising to pay back interest on it or the simplest and maybe the most destruction way is to just print it.
Just last week the U.S. dollar reached 2009 lows. Since September Congress has spent over 4 trillion dollars and obligated the American taxpayer another 7 trillion dollars to help struggling financial institutions and companies who were in desperate need of capital. In the past we’ve had countries like China and Japan who have bought up a lot of our debt, but as this economic storm has worsened there are no foreign nations that want anything to do with buying our debt. The World has loaned us the money whenever we needed but these countries don’t want or need it anymore.
This country has lost sight of what our founding fathers who wrote the constitution envisioned. Almost anything you can think of has some sort of tax. While at the same time the government has gotten to be the last line of resort for failing companies. They’ve bailed out companies who got involved in far too risky business. Right now, several states are facing big budget deficits. California wants the federal government to back its loans. There has to be significant changes in U.S. policy or the problems are only going to continue to grow out of control.
Recently, the Federal Reserve has begun printing money to buy bonds which is defacing the dollar. Now all the bonds they don’t buy are even less valuable then they were before. The more money the Fed prints to buy bonds, the more they are forced to buy.
On top of that, the Federal Reserve is buying TIPS which are known as Treasury Inflation Protected Securities. It’s just absurd to think the most powerful financial regulator in this country is buying protection against inflation. The more TIPS they buy the more inflation they are creating for this country in the long run.
This is a radical method that is going to have to be stopped sooner or later. The Federal Reserve can’t monetize and control the bond market no matter how hard they try. The real problem is that the treasury is selling more then the feds are buying. The United States 11.2 trillion dollar debt is 79 % of this country’s gross domestic product.
The aggressiveness of the Federal Reserve over the last few months to try and stimulate the economy could cause slow economic recovery. The demise of the dollar is going to be painful for all Americans. The world is sick of supporting our debt and lending us money. Countries aren’t happy with what’s happening here in America and there’s going to be a severe price to pay.
Inflation is going to be a problem down the road, how big and bad could it get? Hyperinflation could be the result of this careless spending and huge government intervention. Inflation will be very high and could get out of control, much worse then it was in the 1970’s. This is when prices increase rapidly and at the same time currency loses its value. This is a worst case scenario, which would result in our currency looking like Germany after WWI, present day Argentina, or even Zimbabwe.
If the government can’t fund the massive debt that has been accumulated over this period of time then inflation will be a significant problem. As a result the dollar would continue to lose its value and be a painful experience for anyone who owns a lot of greenbacks.
There’s no easy solution to a problem of this magnitude. When push comes to shove something has to give, and let’s hope it’s not the American dollar right down the toilet.