Wednesday, December 24, 2008

“A trillion here, a trillion there, pretty soon it adds up to real money.”

It used to be that a billion dollars was a lot of money. Senator Everett Dirksen, a senator back in the age of reason once said “A billion here, a billion there, pretty soon it adds up to real money.” I wonder what the good senator would say now.

We have gone well beyond the idea that a billion dollars is “real money.” Today as we approach the age of socialism real money is measured in trillions of dollars. Of course socialists don’t talk about trillions of dollars; like in everything else they do, success is achieved by “incrementalism” (my word). Incrementalism, when it comes to money, is the Dirksen idea about real money except socialists no longer think in terms of millions, that’s chump change by government standards; no, congress and the president (including the president-elect) talk of the need to spend merely billions of dollars at a time but simpletons like me can add the billions and billions and come up with trillions of dollars the government wants to hand out.

It used to be, before the age of reason expired, that government spending was more or less in line with government income. Since most people paid taxes back then, the idea of raising their taxes was not popular. Today however when not all people pay taxes, the idea of raising taxes sounds pretty good to a large number of voters, citizens or not, because they are on the receiving end of government handouts. Actual working folks who pay most taxes to the government are in the voting minority so it becomes easier to get a majority of voters to be indifferent to increasing taxes or actually proponents of tax increases – that’s how it is in the dawning of the age of socialism.

Spending trillions of dollars today does not actually require the government to raise taxes (except in California and some other states, but that's another story). The federal government has a tool at its disposal for getting whatever amount of money it wants for its agenda. The fact is congress is actually not responsible for making money, at least not directly. The Federal Reserve Bank is in charge. The “Fed”, as it has become affectionately know to plutocrats, buys ink and paper, and gives it to the Treasury Department who tells the printing office to make money in whatever amount the Fed wants.

There is no expectation that Americans will make up the trillions printed by paying more taxes, that is impossible. The United States entire gross national product is only about $14 trillion so if taxpayers would be required to pay into government the trillions the Fed commissioned, our economy would collapse overnight. Not only would there be no soup lines as in the thirty’s, there would be no soup.

No, American taxpayers won’t pay the trillions the socialists want for nationalizing industry and banks; it will fall upon foreigners to buy the newly printed phony money in the form of government bonds and other securities. This works great as long as other governments and sovereign wealth funds are willing to take unsupported American paper, IOU’s so to speak, and replace it with something of value.

What we have here is a game of cards. Foreign money buys our paper because to do otherwise will cause the American economy to collapse. If America collapses, then all the previous dollars and investments they accumulated will be worth nothing so they will lose all. As long as the fiction of American economic strength is maintained, the house of cards stands, no one loses any money and American socialists can spend and spend without the risk that angry taxpayers will see socialism for what it is and revolt at the ballot box.

Is this a great country or what?

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