RON SMITH SPEAKS OUT VOICE OF REASON

Debt and More Debt, That's the AnswerTuesday, November 25, 2008 - Ron Smith

The word “stimulus” has never been more in vogue than it is now. All the highly educated economists selected by the incoming president to take charge of the government’s battle against economic meltdown are said to be in agreement that no matter what, countless billions of additional dollars must be deployed as a “stimulus” to the imploding economy. The mind reels as it contemplates how in the world more of what caused the problem in the first place can possibly cure it. Ron Paul described the strategy as trying to cure an ill patient by giving him poison.

For all their bally-hooed brilliance, the Obama economic team – Tim Geithner, Larry Summers, Christina Romer and Melody Barnes – are products of universities where they were taught Keynesian economics. As a result, they believe that the market correction of the problems caused by Federal Reserve-created credit is the problem itself. This misdiagnosis leads to precisely the wrong treatment for the malady, the printing of more dollars. Richard Maybury says, ‘They are rather like the drug addict who thinks withdrawals are his problem, so he keeps shooting up in order to avoid them.”

Every day we hear about the need to get the consumers spending again, which means borrowing like they used to. But people don’t want to borrow now and lenders don’t want lend now, because the confidence, the “irrational exuberance” that made the markets soar has turned into fear about the future. The mania (greed) has morphed as it always does when markets crash, into fear. The Fed has been inflating the money supply since its creation in 1913. The brute fact is that the private banking cartel, whose ostensible purpose was to protect the value of the dollar, has instead presided over its destruction. The 1913-dollar has been reduced to four cents today.

Federal debt is now rising in a hockey stick curve, accelerating past $10 trillion dollars and racing toward infinity. Your individual share is in the neighborhood of $35,000. That’s what you owe our creditors now. Check it out. Then tell me how creating even more debt, flooding the economy with more dollars is going to turn things around. The Keynesians are without a clue. The Austrians are without influence. The likely result of what our leaders are doing in response to the crisis is the eventual destruction of the dollar after a period, however long no one knows, in which cash will be king.

In the end, inflation will almost assuredly overtake the massive ongoing asset deflation, which has seen the loss of at least $30 trillion in stocks and real estate valuations in just the last few months. When will the remaining four cents of that 1913-dollar disappear, and what happens then? It’s beyond imagining for most of us and that’s probably just as well.

WBAL Radio Baltimore

http://wbal.com/