Do you recall all those “debates” over the federal debt ceiling that have taken place over the past 30 years? Every time the debt ceiling came up, here at FFF we said, “Don’t raise the debt ceiling. Force the feds to live within their means. No more debt.”
Every time, we have been drowned out by statist commentators within the mainstream press who, like Chicken Little, have consistently cried, “Raise the debt ceiling one more time! If you don’t, the sky will fall in on us! Just one more time!” Some of those commentators even maintained that the federal debt didn’t matter because “we owe it to ourselves.”
Of course, Congress and the president, time after time, have raised the debt ceiling to permit the feds to continue the money flowing into the coffers of the welfare-warfare state. After each time, they have continued spending money like there was no tomorrow, knowing that they could make the same Chicken Little arguments for raising the debt ceiling the next time.
The assumptions always been that the Federal Reserve, the federal government’s central bank, would simply print up the money to pay off the debt, which, of course, would inflate the money supply, thereby reducing the value of everyone else’s money.
The beauty of this monetary-debasement scheme, from the standpoint of federal officials and those people who feed at the public trough, was that most people would not realize that the Federal Reserve was the cause of rising prices of gasoline, food, clothing, healthcare, and other essentials. They’d follow the federal cue that greedy businessmen and profiteers were the cause of inflationary suffering.
Of course, this inflationary process has been going on for decades. We addressed it in our very first year in 1990 here at FFF. We’ve been addressing it ever since. As I have repeatedly stated over the past three decades, out-of-control federal spending, debt, and inflation are not going to end well for the American people.
Decade after decade, the Fed has been debasing the currency by inflating its supply. Artificially increasing the supply of money inevitably causes its value to go down. That decrease in value is reflected in the rising prices of the things that money buys, like gasoline, food, healthcare, and clothing.
That’s why silver coins, which circulated as money back in the 1950s and 1960s, were ultimately driven out of circulation by the Federal Reserve’s inflationary policies. When the Fed consistently inflated the supply of paper money, year after year, it made no sense for people to use their silver coins in their everyday transactions. Better to use the cheapened, debased paper dollars and keep the silver dollars.
Ever since the Federal Reserve was brought into existence in 1913, America has been besieged by an endless series of booms and busts. The Great Depression is a good example. So is the Great Recession of 2008. The artificial booms come with the easy money that the Fed prints up and uses to inflate the money supply supply. The busts come when the Fed panics over rising prices and begins to contract the money supply.
That’s what is going on today. The Fed is panicking. After 15 years of inflating the money supply, it just raised interest rates in response to public anger over the rising prices of gasoline, food, clothing, healthcare, and other essentials. It’s promising to do it again in July.
But the problem is that the Fed is in a trap. If it continues trying to contract the money supply, it threatens a crash in the stock market, which is everyone’s shibboleth. It also threatens a drop in home values, where homeowners have built up a mountain of inflation-induced equity. It also threatens taxing authorities with less property taxes if home values go down.
What does all that mean? Enter Donald Trump, the man who statists hate with an obsessive passion. He’s waiting in the wings to come back as president. If the Fed throws the economy into a Greater Recession, it increases the chances that Trump will easily defeat Biden in 2024.
What to do? I think there is a possibility that the Fed is bluffing and will not contract as much as it is promising to do. Time will tell, but my hunch is that given the choice between soaring prices and Donald Trump, the statist pressure to keep Trump from becoming president again will cause the Fed to buckle. In any event, get ready to enjoy the spectacle of statist panicky reaction to the Fed’s actions insofar as the return of Donald Trump is concerned. I predict that the statists will be calling on the feds to impose wage and price controls rather than contract the money supply.
After all, don’t forget: Federal spending and debt continue soaring. When the debt ceiling comes due, they’ll raise it again. Why, President Biden just announced that he’s sending another $1 billion to Ukraine. That’s on top of the $40 billion that Congress just authorized him to send to Ukraine. Where does Biden get that extra $1 billon? Where does he get the authority to send U.S. taxpayer money on his own to a foreign country? Does he have a special slush fund for that type of thing?
It doesn’t matter. What matters is that they continue spending and borrowing money like there was no tomorrow. The federal debt is now $30 trillion, which received a big heft from all those pandemic “stimulus checks.” That $30 trillion in debt doesn’t even include Social Security and Medicare obligations. That debt has to be paid off. Will it be collected from U.S. taxpayers? If you believe that, I’ve got a nice bridge in Ukraine I’d like to sell you. The only other way to pay it off is the way they have been using since 1913 — the inflationary printing of money by the Federal Reserve, which would mean even higher prices ahead.
As we have repeatedly stated here at FFF, especially in every debt-ceiling debate, this will not end well for the American people. As we have been saying here at FFF since 1990, there is only one way out of this monetary and fiscal morass and mayhem that welfare-warfare statists have foisted upon our nation — libertarianism.
The post Day of Reckoning for Federal Spending, Debt, and Inflation? appeared first on The Future of Freedom Foundation.
The Future of Freedom Foundation was founded in 1989 by FFF president Jacob Hornberger with the aim of establishing an educational foundation that would advance an uncompromising case for libertarianism in the context of both foreign and domestic policy. The mission of The Future of Freedom Foundation is to advance freedom by providing an uncompromising moral and economic case for individual liberty, free markets, private property, and limited government. Visit https://www.fff.org