Using Visa to Pay Mastercard

Let’s stop and hypothesize for a minute.  Let’s say your MasterCard is maxed out.  So is your Visa.  Same with the Discover Card.  You have a car payment you can’t afford.  Your mortgage is well beyond your means.  You’re barely making the payments.  If you continue to make the minimum payment it will take decades to pay off with the vast majority going to interest.  There is no end in sight.  So what do you do?

Well if you’re Dave Obey, you don’t worry about small technicalities like losing your home or filing for bankruptcy.  You simply ask for a higher credit limit.  Looks like crazy Dave is at it again.  From the Examiner:

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The International Business Times has just reported that House Majority Leader, Steny Hoyer, says Congress may need to raise theU.S. federal debt ceiling by $1.8 trillion.

“It is December,” House Appropriations Committee Chairman Dave Obey said, “we don’t really have a choice. The bill’s already been run up; the credit card has already been used. When you get the bill in the mail you need to pay it,” he added.

By “pay it”, Obey means borrow for it.

Obey’s words perfectly encapsulate what has become the government’s chief fiscal operating principle: spend first, figure out where the money is going to come from later.

But while the American government may be in the habit of kicking into the future the question of how it can pay its bills, other nations are beginning to ask America this very question.

Last month President Obama visited China and found Chinese officials taking a keen interest in his healthcare reform plans. The Chinese’s interest in healthcare did not centre around the usual questions that have been preoccupying Americans. Instead, one participant in the talks recalled, “They wanted to know, in painstaking detail, how the health care plan would affect the deficit…”

It is not surprising that China should take more of an interest than most Americans in this crucial question. After all, the United States already owes China two Trillion dollars and could be forced to beg for at least half that much again if Obama’s health care promises are realized. “Like any banker,” the NYT reported, “they wanted evidence that the United States had a plan to pay them back.”

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Obey and Obama have hit the accelerator on this big debt train and seem bound and determined to charge ahead full speed whether there is track laid ahead or not. Ever wonder where the government gets money after it has already taken ours?  Well of course, it borrows.  How much does it borrow?  How much do we owe?

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Spending as if there is no tomorrow

Obama’s curious method for correcting his predecessors’ mistakes has been to perpetuate their disastrous policies to an unprecedented extreme. In an attempt to stimulate the economy out of the recession (a recession caused, principally, by so much unpayble debt), Obama borrowed more federal funds than any President in the nation’s history. Hardly had he settled into the White House when he signed two new bills, the $787B stimulus and the $410B omnibus, which together equal the $1.2T deficit he “inherited.” Consequently, when the 2009 fiscal year finally ended this October, America had run up an all time record deficit of $1.58 trillion – 3.4 times the $459B deficit of 2008, and 10 times the $160B deficit of 2007.

The impulse behind Obama’s borrowing spree is an economic theory known as Keynesianism. John Maynard Keynes (1883 –1946) argued that a failing economy could be revived by governments injecting money into it. As the new money began circulating, Keynes theorized, it would reach people who would spend it, creating economic growth and more revenue for the state coffers.

Selling ourselves into slavery

Keynesianism has an air of plausibility about it until we stop to ask where the money actually comes from that government so generously pumps into the economy. The answer, of course, is that it can only come from debt. However, given the inflationary implications of debt (see section below on how the Government gets money), even this indirectly comes out of the pockets of citizens in the form of currency devaluation.

If the amount of money that the government desires exceeds the amount that American banks are willing to loan, then the government will go, hat in hand, to foreign banks. This is exactly what the Obama and Bush administrations have done, with the result thatChina and other foreign holders of America’s national debt are owed a combined total of about $3.3 trillion. Just to put this problem in perspective, America’s national debt is larger than the total economies of China, the United Kingdom, and Australiacombined and is quickly approaching or exceeding the USA’s 14 trillion GDP. (It appears less than that in charts, because the government has been cooking the books since the Clinton Administration. They are not counting Social Security and Medicare obligations as part of the debt.) If the pattern continues over the next decade, the government will borrow approximately $1.72 million every minute.

The result is essentially that the American government has sold its people into slavery. Those who will be hit the hardest with this debt servitude are those future generations of Americans who will be crippled by their obligation to service the interest on such an extortionate debt. But it is not just the burden to pay the debt that will cripple successive generations. They will also face the much more terrifying prospect of holding a devalued currency, since devaluation is always the result of pumping so much debt-money into the economy over long periods of time.

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The article is a great read, even if it is a bit long.  Read the whole thing and educate yourself.  Politicians hate educated voters.

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