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Practically Speaking

Kyle and her husband moved to Brookfield in 1986. She became active in local politics and started blogging in 2004. Her focus is primarily on local issues but often includes state and national topics, too. Kyle looks at things from the taxpayers' perspective in a creative, yet down to earth way, addressing them from a practical point of view.

I'm going into the wheelbarrow biz, or The "Peso-fication of the US$

Bigger picture, Obama 2008, Politics, TAXES, THE ECONOMY, Unintended consequences

All actions have consequences. Consumers living beyond their means, taking out loans for homes they couldn't possibly afford, resulted in the sub-prime crisis, Fanny and Freddie mess, and meltdown of the US economy.

The TARP bailout for $700-some billion has opened the door to every Tom, Dick and Harry industry standing in line for a bailout handout: the auto industry, rental car companies, ethanol industry, and credit card companies to name a few. States such as California and even Wisconsin might put their hands out as well. President elect Obama is talking about another bigger and better stimulus package too, asap.  

Our government acts like they can give out billions of bailout and stimulus money with no consequences.

But history tells us no economy can thrive by printing up and passing out dollars. It did not work for Germany, where you practically needed a wheelbarrow to hold your Marks to buy a loaf of bread. "In 1914 one egg cost less than one mark. Nine years later an egg was 80,000,000,000 (eighty billion marks)."*

To finance the new spending during Carter years, the joke was, Hey, Jimmy, just print up another roll of $20s! We know how well that worked.

So why do we think we can do what no other government could do in the past, by printing up new money to finance and shore up failing industries with no consequences? Arrogance maybe?

Money Morning sounded another warning today: With Billions in Bailout Funds Flowing, the "Peso-fication" of the Dollar Continues:  

The plethora of bank and corporate bailouts, stimulus plans and interest-rate cuts that the U.S. government has produced over the last three months can only lead to one outcome: The U.S. dollar has to decline.

During the crisis so far, the dollar in general, and U.S. Treasury bonds in particular, have been regarded as a “safe haven,” making the dollar strong and pushing long-term U.S. Treasury rates downward. In the New Year, however, this is likely to change – the weight of the added supply of dollars in circulation will be too great for the greenback to shrug off.

Much of that report makes my head spin, but I do understand the basic principle that you cannot increase the money supply so dramatically without inflationary consequences. The amount of deficit spending we have committed to so far is unprecedented.

Usually I check the stock market every day and look at how the dollar is trading too. Today, the US dollar was down in all trading: against the Canadian dollar - $1.23 vs $1.28 a few days ago, against the Euro, the dollar had fallen 4 cents to .76.  

If this trend continues, the dollar loses value, therefore, you need more of them to pay for purchases. Hence, the wheelbarrow will be needed to carry your cash to the store! On second thought, people will just use a credit card instead of cash, so no need for the wheelbarrows.

What we need is to tighten our belts and live within our means, be it at the local, state, or federal level of government. It is time to act like grownups and say NO to frivolous spending and bailouts. If we don't, the Carter years will look like the good old days for the dollar and us.

 

Did you contact Senators Kohl and Feingold about the auto bailout? Senator Kohl (Phone: (414) 297-4451, (202) 224-5653) and Senator  Feingold (Office of Senator Russ Feingold (202) 224-5323)

*From Richard Maybury's Whatever Happened to Penny Candy, Wallpaper, Wheelbarrows, and Recession, pp 52. 

Please, comment content should relate to the subject of the post. Although I try to respond to many, do not interpret my lack of a response as agreement.

Links: 

 

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Brookfield7, Fairly Conservative, Vicki Mckenna, Jay Weber, The Right View Wisconsin, Mark Levin, CNS News

 

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