Lux Lucet

Assuredly I say to you, you will by no means get out of there till you have paid the last penny. (Matt. 5:26)

Debt. The entire western world is drowning in it. The current US is about $15 trillion, and that’s not counting the unfunded liabilities such as Medicare, Medicaid, Social Security, etc. Depending on whom you talk to, when those programs future liabilities are added in, the national debt balloons to many tens of trillions of dollars. Europe is a mess. Greece is bankrupt, as are Italy, Portugal, Spain and Ireland, the so-called PIIGS. Japan has a debt to GDP (Gross Domestic Product) ratio of over 200%.

So what do western governments do when they’ve maxed out their credit cards? Not what you and I would do. We’d be forced to cut back on our spending and payoff our debts. But not the folks in Washington, Brussels and Tokyo. No sir. When governments are facing bankruptcy, they simply create a new line a credit for themselves through the magic – fraud would be a better term – of quantitative easing. For the uninitiated, this is central banker speak for inflation, or to put it another way, money printing.

There once was a time when this country was on the gold standard. A dollar was defined as a certain weight of gold or silver. Today, no one knows what a dollar is. The term is meaningless. It’s definition, whatever. This is bad for you and me, but good for the parasite class in Washington and the phony, crony capitalists on Wall Street.

Governments, financial hucksters and the academics who aid and abet them, would have you believe that debt doesn’t matter. These folks would have us believe that we can grow our debt, roll it over indefinitely, and never have to pay it off. If push really comes to shove, the boys at the Federal Reserve can use the nuclear option and print lots of crisp, clean, brand spanking new pieces of paper festooned with pictures of George Washington and bail out the whole stinking mess.

This is preposterous.

Every time the Federal Reserve goes on one of its money printing jags, it destroys the value of the dollars already in circulation. It steals money right out of your checking account, savings account and 401(k) plan. It debases the dollars in your wallet, your piggy bank and your trust fund.

Some of this new money is used to buy toxic assets from Wall Street investment banks. The big boys get bailed out, you get stuck with the bill.

Some of this money is used to monetize the US debt. Monetizing the debt means that instead of dealing with the national debt honestly and paying off its creditors through tax receipts, the government simply has the Federal Reserve print the money. The government types call this sort of thing Quantitative Easing (QE). This is a fifty cent word is designed to pull the wool over the people’s eyes. It’s probably wise for the masters of the universe to use this term, because if they ever spoke plainly, they would be faced with a righteous pitchfork rebellion. You see, dear reader, QE by any other name is this: counterfeiting.

Here’s how it works. Caesar Augustus decrees that all the world should buy Treasury notes. However, unlike Joseph and Mary, the recalcitrant financial markets do not immediately set out for Bethlehem. But the government and the Federal Reserve, those wily fellows, are not to be stopped. Out of nothing the Fed creates currency units called dollars – let there be cash, if you will – and then gives these dollars to certain banks called primary dealers. The primary dealers turn around and use the newly created money to purchase newly issued US government debt instruments such as Treasury Bills, Treasury Notes and Treasury Bonds. The new money has now been released into the general economy and is poised to do its dirty work, which it does in at least two ways.

First, it artificially lowers interest rates. This is good for the government. After all, the interest on $15 trillion worth of debt can be a bit onerous, even if you are Uncle Sam. On the other hand, it’s bad for you and me. For this same action also has the effect of lowering the interest you receive on your savings account, money market funds and CDs. So if you wonder why your bank is paying you 0.001% interest on your hard earned capital, now you know one reason why.

Second, it makes all the dollars you already own worth less. It’s the simple law of supply, all things being equal, the greater the supply of a particular good or service the lower the price. The more dollars in circulation, the less those dollars are worth.

The QE scam has allowed the government and the politically connected financial community to kick the financial can for the last three years. These folks would have you believe that they have solved the problems plaguing our economy and that we should all just get back to prosperity already. In truth, they’ve done nothing of the sort. The government has attempted to solve our debt problem by taking the nation further into debt through government stimulus spending paid for by counterfeit dollars.

This is economic quackery.

Jesus was right. All debts must be paid in full. No amount of stimulus spending, money printing or deck chair rearranging will make our financial problems go away. Unless Americans face this fact and demand financial accountability from government, they will learn the truth of Christ’s words the hard way.