Wednesday, November 10

"Quantitative Easing" mean anything to ya?

The day after the election, Federal Reserve chairman Ben Bernanke quietly approved a second round of a fiscal gimmick called "Quantitative Easing." Us flyover-country folks would probably call it what it really is: printing a trillion dollars of new cash.

The Fed's doing QE--astonishingly uninformative euphemism, eh?--to pump more money into the U.S. government.

A lot more money.

It's doing that because our huge new deficits have caused the normal buyers of U.S. government debt to stop doing that. In effect, they've closed the bank window on the government.

Without a constant flow of cash, the government can't cover the checks it writes to its employees.

Fortunately Social Security and unemployment benefits are paid from a separate, magic account that's replenished by solar power, so those will continue to be paid as usual.

(What? You're kidding! But here they've always told us there's this "lock box"...!)

Ah. Disregard that last. Seems Congress has been raiding the Social Security fund for decades to fund its pork, so that fund is completely dependent on current contributions to cover its checks.

Faced with its own insolvency, the govt had about three choices: cut spending in other areas, raise taxes, or...simply print the money it needed. It chose option 3.

If you're a student of history you may recall that another country's government tried this in the 1920's. The result was a thing called "hyperinflation" that utterly destroyed all savings and impoverished the middle class. (Try Googling "Weimar Republic or "hyperinflation.")

So basically we've just crossed the line to banana-republic status.

You enjoying the ride yet?

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