Home Economics

Margaret Thatcher observed this about socialism’s fundamental weakness: eventually, you run out of other people’s money.

Well folks, we are rapidly approaching that point here in the good ol’ USA. No amount of tax increases will fill the chasm of our national debt; the Fed’s unbridled money-printing certainly won’t. Our only choice is to expand the economy with sane tax & regulatory policies while putting the brakes on printing new money.

The first will allow the economy to expand, ideally to a level that actually provides value to that money we’ve already printed. And those printing presses will have to be shut off for a while, causing interest rates to go up. But this must happen, otherwise our dollars will become worthless sooner rather than later.

Think of this in terms of personal finances – if you make 50,000 a year but spend 75,000, you’re in the hole for 25 grand. Sometimes it’s for legit reasons, sometimes not. Either way, most people would handle that deficit with credit cards or bank loans.

But here’s a twist: let’s say that instead of getting paid, you’re trusted with a magic money-printing machine, and its capacity is normally pegged to the value of your salary. You should be able to print 50 grand a year no problem. If you want to print more than that, someone else has to guarantee its value since you can’t. You can do this because lenders know you’ve always been good for it.

At some point, you get a case of the “I wants” and just start printing money to spend on who knows what. Lenders might tolerate this for a short time, particularly if everybody else in the neighborhood is having even worse trouble. They’ve either been spending way more than they earn (Greece), or cosigning too many loans for less well-off neighbors (the EU), or even flat-out lying about their salaries (China). Either way, you’re pretty much it for the time being so you don’t change any bad habits.

Eventually, some of your neighbors get their act together and are now doing pretty well. Individually, they might even make less than you, but they’ve all managed to save a little and have kept their debts low. Pretty soon, lenders aren’t interested in you because they’re starting to worry that you’ve bitten off more than you can chew. And now they have options. So the loans you counted on for all those goodies are starting to dry up – but you’re still left with the same amount of expenses.

Now what? You can either file bankruptcy (bad, bad move – nobody would trust anything from your magic money printer for a long time) or find a higher paying job. Maybe even a second job.

In other words, make mo’ money. Buckle down, limit your spending, and increase your income until your debt is back to a manageable level. Then start steadily paying it off while vowing to never, ever, get yourself into such an awful position again.

The alternative, bankruptcy, leaves you at the mercy of the people with money. And as we see with the EU, this can have undesirable consequences like loss of self-rule.

It’s almost like that was the idea all along…

One of these symbols is not like the others…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: