Wednesday, April 13, 2011

GETTING OUT OF DEBT

I see where President Obama is proposing 4 trillion dollars of debt reduction to compete with the Republicans' push for 5 trillion in spending cuts. Of course, true to his commitment to class warfare, the President’s plan includes taxes on the hated rich people.

They have until May 16 to agree on something. That’s when the 14.6 trillion dollar federal debt limit will have to be raised, if we are going to borrow enough money to pay the obligations that will come due by then.

In short we have to borrow money to pay back money we have already borrowed.

Make sense to you?

Not to me. It’s like owing $10,000 on your VISA card and paying it back by putting it on your MasterCard.

Du?

The federal government, like everyone else, can only get money in one of four ways. It can beg, borrow or steal. Or it can get money the old fashioned way. Earn it.

You and I have to balance our budgets. What comes in must not be less than what goes out. Money that you borrow isn’t income. It is the absence of income. It’s called going in the hole.

You gotta pay it back. And the worst part is that until you do pay it back, the interest piles up.

I hate paying interest and penalties. It always makes me feel like somebody has a gun to my head. In the case of our national debt, the gun is often held by other nations.

How much is this tribute we are obligated to pay to our creditors? Let’s see. A million has six zeros. A billion has nine zeros. A trillion has twelve zeros. So one percent of a trillion – take off two zeros – is a number with ten zeros. Ten billion.

So if we are paying three percent interest on the 14 trillion dollar national debt, we are ponying up 30 x 14 or 420 billion dollars a year in tribute.

That’s just the interest. How much of the principal do we have to come up with?

In December of 2008, the national debt was 10 trillion. Today it’s 14 trillion. That’s a forty percent increase in just over half of Barack Obama’s first term.

Should we worry about it? Will it be a burden on our children and grandchildren? Of course it will. So how can we pay off the debt and get our government on a pay as you go system?

Easy enough. The constitution empowers Congress to coin money. In fact, it is more than a power. It is a duty. Just like setting the standard of weights and measures.

Can we crank out enough gold dollars to pay off 14 trillion in debt? Not hardly. Even at $1,400 an ounce, we probably don’t have enough in Fort Knox. And just shipping that much hard money to our creditors would be a monumental task. Anyway, who would want to make a monthly mortgage payment with gold coins?

But the constitution doesn’t require gold, and doesn’t define the word “coin.”

So how about this: the feds start issuing electronic money. Plastic cash cards loaded with 100, 1,000, 10,000 or 100,000 dollars. Easy to use. Easy to carry. Can’t be counterfeited. Program them with an LED window that displays the balance on the card when you pinch it.

The U.S. dollar is the international reserve currency. That means other countries use our dollars to pay each other when they do business. Plastic cash cards would work as well if not better than federal reserve notes.

Would it cause inflation?

Maybe. But sooner or later the fiddler has to be paid.

1 comment:

  1. "The federal government, like everyone else, can only get money in one of four ways. It can beg, borrow or steal. Or it can get money the old fashioned way. Earn it."

    There is another way. Create Greenbacks.

    ReplyDelete