thoughts on politics

November 26, 2008

climbing back on the horse

Filed under: Uncategorized — Matt @ 3:20 am
Tags: , , , ,

After not posting for a couple of weeks, it becomes hard to start again.  Knowing what to post about, wanting to catch up on things missed and trying to offer explanations for the large gap of writing all become questions that further delay writing.  This happened to me; now I’m stopping it.  In the future I’ll just resume without any explanation.

In the time since my last writing, a couple of things worth noting have happened: Obama won, the economy sucked, and everyone in America lost.

The story that finally motivated me to write was this:

U.S. Unveils New Programs to Ease Credit

The Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they will print as much money as needed to revive the crippled banking system.

The two new efforts — one mainly to finance loans for consumers, and an even bigger one to push down home mortgage rates — marked the latest but hardly the last of the federal government’s efforts to shoulder the losses that began with subprime mortgages and have spread throughout the economy.

All told, the government has assumed at least $7 trillion in direct and indirect financial obligations in the form of Wall Street bailouts, emergency lending and government guarantees on bank deposits, inter-bank loans and home mortgages.

As the New York Times writes, $7 trillion.  $7,000,000,000,000.  I saw a story a couple of weeks ago, posted by drudge, which had the grand total figure at $4.5 trillion.  Since then our government’s commitment to fix our economy has expanded $2.5 trillion, or about 50%.  Has it stopped now?  I doubt it.

PERSPECTIVE:

The US government’s budget for fiscal year 2009 (that being Oct 08-Sept 09) was $3.1 trillion.  Note that this amount was $407 billion higher than what the government took in, by its own accounting.  That is, this budget was already a deficit.

The budget was released in February, before the collapse of Bear Stearns, and before the depth of the economic crisis was apparent.  Thus, all of this money to “help” the economy comes from outside the budget.  In fact, it dwarfs the budget for this year!  The government has already spent or pledged to spend more than twice as much as its own admitted operating costs for the next year. That’s on top of its own operating costs, so in effect triple the amount budgeted.

No doubt none of this new money was planned or budgeted for.  Where then will it come from?  Americans would notice a tax increase of $7 trillion, as that would be around $23,000 per person (taking the population to be 300 million).  Since not every person is a taxpayer, it’s a lot more than that per taxpayer.

Yet there won’t be a tax.  I won’t see the taxes on my job at the newspaper next year shoot from $100 to $30,000, or anything like that.  (In fact, Obama has promised that not only will I not see a tax increase, I will see a tax decrease as someone earning less than whatever his quoted income limit was.)  The money will be printed.  Well, I doubt it will actually be physically printed; it’ll just be credited to the accounts of  the banks and companies receiving it.

We can of course be mad about the moral injustice of this action, but I see it as being economically unsound, as well.  Again, going by the government’s budget documents, the estimated GDP of the American economy for this time will be $15 trillion.  The government is attempting to add to the economy an amount equal to half of all the goods produced in the country last year.

Is there any way this can not have a devastating effect?  News stories always list inflation down in the article as a potential risk of the plan.  The money supply is exploding.  We will now experience drastic inflation as well as the shocks of the rest of the credit crisis.

Does anyone think that the leaders in Washington, outgoing or incoming, know what the fuck they’re doing?  The government created this mess; do we now look to the government to fix it?

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