Okay, so it’s the most common thing to comment upon, and I’m beginning to feel a bit like a reactionary pundit looking at my site. I’m glad there are a few completely original posts to balance out the fact that so much of my writing seems to be in response to something that catches my attention or gets my dander up.
It’s a little funny and a lot sad to consider others’ notions of how exactly an economic bailout of $700 billion dollars occurs. There are several theories on impact and implementation, motivation and rescue that people carry around.
Sadly, the most common one seems to be a weird combination of ignorance and apathy. The immediate thought to most people seems to be that Wall Street will get the money, or some ethereal being, the God of Finance, who art The Economy. The great men of our times pay homage to The Economy, how it surrounds us, and protects us in every aspect of our daily lives. And if we displease it, it will smite us. I could write three posts about this metaphor. I still might. But for now, that’s just the prevailing theory carried around in the pockets of most Americans, next to a couple credit cards and a Jackson.
On the conspiracy theory front, some folks figure the US Government is going to accrue a massive lump sum debt to write a single giant check to the New York Stock Exchange, and flush a truckload of dollars in hopes that it’ll fix things, but really just wasting money that regular people will be forced to pay back later.
Others think that it’s a bit like playing enabler to a gambling addict, allowing them to keep or squander their winnings while others bail them out on their bad days when rent is due but nowhere to be found. You’ll hear the question repeated “they got to keep their profits when the market was up, why should taxpayers bear the brunt when their gamble goes bad?”
Here’s the sad, simple truth. None of these is entirely accurate. There is no government debt being accrued in any real sense. Trillions of dollars in national debt is nonsensical, a completely imaginary allocation that has almost no practical bearing on any real resources. The current GDP weighs in at about $14.3 trillion. The National Debt is currently around 9.5 trillion, but if you count places where the US has borrowed from itself by defunding mandates, that is, borrowing from Social Security, Medicaid, and the like, the outstanding unpaid obligations stand at 59.1 trillion, according to Wikipedia. In real terms, that equates to the entire output of the US economy running at wide-open throttle for over four years without so much as feeding ourselves or fueling the machinery we use to achieve that level of output. Saying rather optimistically that we could split the difference, and live off of half of what we produce collectively, paying back what we owe would require eight solid years of slavery from the entire nation at full productivity. It’s interesting to try to put it in some sense of perspective, but realistically, there is no scale on which the human mind can begin to understand those sorts of numbers. If you try to talk about things we’re familiar with, like droplets of water in a swimming pool, at some point our brains will automatically make the switch, and begin thinking more and more about the pool, and less and less about the droplets.
That’s what we’ve failed to do with the debt, and what the powers that be are taking advantage of. $700 billion will not be financed as part of the national debt, in the sense that someone will agree to donate some of their salary, or pick up some overtime, or sell a car. $700 billion is not a number that an individual can comprehend on a daily basis. It’s not something you can sell a car to afford, or go without extra cheese on your burger, or get an apartment so you can sell your house, or even a number that has any bearing on the amount of money you’ll make in a lifetime. It won’t be added to your taxes, which is why most folks won’t complain.
It will be printed into existence.
In an electronic sense, a bank of infinite bounty, the Federal Reserve, will paperclip a check to an IOU and hand it to Uncle Sam, who will then cash it. The same Federal Reserve will cash the check. If it doesn’t have the cash on hand, it will print money on the spot to hand over. The National obligation might be 59.1 trillion, but there are only a certain number of dollars in circulation, and a couple of them are in my pocket waiting to buy me lunch. $700 billion in brand new money is going to dilute anything that claims to be a dollar, by also claiming to be real dollars.
My little girl’s lunch money will be taxed without ever leaving her pocket. That money will pass briefly through the hands of the United States Treasury, and directly into the hands of several multimillionaire investors without so much as a thank you note. And when I go to ask them to borrow some chump change so I can buy a house, and keep putting lunch money in my little girl’s pocket for them to keep taking little bits of, I’ll be denied.
What they’re going to achieve with this bailout is a massive run on dollars with breathtaking runaway inflation. It’s nice to be on the Canadian border, so that I can get regular Canadian dollars, something a bit more stable. If I stick dollars under my mattress for safekeeping, it won’t be the American ones.
Watch me get arrested for tax evasion for keeping my money in a Canadian cookie jar.
