How To Finish Off The Economy

The Wall Street Journal did a great job putting numbers to what we rational people already understood.  Obama's budget numbers just don't add up.  To possibly over-simplify the point of the story, if the government took all of our money it still wouldn't pay for all the programs in the budget.

Last week a friend and I were having a conversation about whether or not Obama is an "idiot" after this particular friend had seen a Republican on television implying that he is.  My friend thought that was disrespectful and it may be.  However, as I thought about it for a moment I realized that we have two choices here.  Either he is truly ignorant (in the way that only an elitist educated with a bunch of theories that don't work in real-world practice can be) or he is employing a dastardly plan that will fundamentally change our country.  I believe it is a little of both.

First the idiocy.  You can not solve a cash flow problem by spending more money.  That is our economic crisis in a nutshell.  The massive buildup of economy was done largely on credit.  What that really means is the wealth being built was on paper, not in actual cash.  This also cause almost everything to be over-priced.  The most obvious example is real-estate.

A commodity's value is determined by what someone is willing to pay for it.  If credit is easily available that amount will likely increase.  We have been spending money for years that we don't actually have promising future payment.  The problem is that eventually those payments come due and if enough people can't make those payments the problem snowballs until amost no one can.

The only way to fix this problem is to go back to cash value.  This will be painful because it means deflation.  The government's answer is to spend more money so that banks will loan us more money to spend.  This is sort of like trying to put out a fire with a bucket of jet fuel.  This is the problem with having so many people in charge who have never operated or managed a real business.  There are all kinds of theories and ideas that sound good until you actually try them.  If you try them on a huge scale you will undoubtedly look like a fool.

Now the evil. As the Journal story showed, the government can not pay for everything by just raising taxes on "the rich".  In fact, there will be somewhere in the neighborhood of a trillion dollars of new taxes which will not come close to covering the spending.  Obama knows this.  I say it's evil because they know that taking us down this road will eventually mean taking most of our money to allow the government to spend it.  The end game is that we all have less control over our own money.  That, my friends, is socialism.  It is deception being played beautifully right before our eyes.  

This is where the idiocy and the evil merge into one giant, economy killing monster.  These taxes amount to pulling a trillion dollars out of a collapsing economy that desperately needs cash.  The it's like knocking down the final load-bearing wall of a building.  Complete collapse.