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Politicians have proven they can’t “manage” the economy, so why won’t they stop digging?

September 15, 2012

The Federal Reserve announced this week that it intends to purchase $40 billion a month in mortgage bonds, and to keep doing it every month, indefinitely.   The stated purpose is to try to lower long-term interest rates, encourage home buying and get people to borrow and spend more.  This is the third time they’ve tried this.

And where do they get the money?  They invent it, though the voodoo magic of government monetary manipulation.  Which means — after you strip away all the bureaucratic nonsense — that they are putting the value of the American dollar (and every citizen and future citizen of this great country) at financial risk.

Just how out of touch with reality are these government economists and the politicians who appoint them?

Interest rates are already near historic lows — and have been for several years now — yet the economy is still struggling to recover from the Great Recession.  (A recession, by the way, that was primarily caused by — and is now being prolonged by —the government!)

Regular people (who have a lot more common sense than the politicians and Federal Reserve manipulators) aren’t going to borrow money and buy homes when….

  • They are either unemployed or feel insecure about their employment.
  • They know the government is already borrowing and spending far more than it can afford.
  • They can clearly see that our bickering and self-serving politicians don’t have the courage to even admit the problem (much less work together to solve it).
  • Common sense tells them that we will soon either have to cut government spending dramatically, increase taxes dramatically, or face total economic collapse.

True, the stock markets enjoyed an increase after the Fed’s announcement. But that’s because Wall Street is full of short-term gamblers with short-term memories and far too much faith in government’s ability to “manage the economy”.   They’ll be equally quick to drive markets back down when the Fed’s latest plan doesn’t work….and sets us up for an even more painful day of reckoning later.

Regular people know that you can’t borrow more than you can afford to repay.  They know that you can’t spend more than you have.  They know that when you find yourself in a hole, the first thing you should do is STOP DIGGING.  Many brilliant economists like Thomas Sowell also understand these truths.

No matter how smart they think they are, politicians, government planners and Federal Reserve manipulators can’t overrule economic reality.  Their attempts to do so are only setting us up for an even bigger collapse later — as history has shown us time and again.

Just one guy’s opinion.   You are invited to post your comments — pro or con — here.

  1. Mike Ruddell permalink

    My explanation is it is a presidential election year and those in power will promise anything to stay in power. As far as the populace believing this latest deception would be the con artist Joe Bessimar*:
    *there is a sucker born every minute.”
    * incorrectly attributed to P.T. Barnum.
    There are a lot of Joe Bessimars running our government at the moment.


  2. Nick Hackstock permalink

    I agree with Joe. The government can’t fix the problem; they are the problem. Business needs certainty to invest and they need freedom from needless regulation. We need a plan to start reducing the deficit, something like Simpson Bowles, so people have more confidence in the future, that we actually can “stop digging” the hole deeper. In addition, the artificially low interest rates are a huge “tax increase” on anyone who was able to save a little money because now they get zero interest on their bank deposits rather than the 3-5% we used to get.


    • Right on, Nick, and thanks for your comments.

      In the book, I failed to mention how the government depresses the earnings of people who save for the future (by keeping interest rates articifically low). You have nicely filled that gap, so thanks again!


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