The House of Cards is Falling Down

The American Economy right now is like a house of cards that is collapsing.  It was built up really high and it looked great and really cool, but even the slightest of breezes can knock the whole thing over.  We tried to hold it together with duct tape and gum and kept building in higher and higher.  

But there is something fundamentally wrong in the first place – it is built of cards and not bricks, stone, or metal.  At one point in time, when we were a nation of producers and savers, it was anchored by a solid foundation.  Now, it is as flimsy as playing cards, based on debt and consumption.

As President Bush said, “Wall Street got drunk on easy credit.”  Well, so did everyone else.  Now we keep hearing about “frozen credit markets.”

After banks have lent out billions of dollars and are not being repaid, what is supposed to happen?  Are they supposed to keep lending?  The only remedy for years of easy credit is the reality of paying back that debt, or liquidating debt that can not be repaid.

At a time when banks should be raising interest rates, we are cutting them.  If you think about it, right now is a time of risk.  Normally, to offset that risk, the creditor charges a higher interest rate.  In our system right now though, we are so tied to debt and borrowing that raising interest rates at all will do more harm than good.  

That is the problem right now.  Right now, we need a tighter monetary policy.  We need borrowing to be expensive so banks will feel confident lending money.  We can’t do this though because everything we do is tied to the interest rates on the debt we already have.  So instead we are cutting rates and inflating our money supply.

We all need to realize that recessions are painful, but historically, they only last around 10 months.  For every dollar we print trying to stave off a recession, we are only adding to pain it will eventually inflict on us.  I could have taken 10 months of sacrifice, but Wall Street, Bernake, Paulson and the politicians couldn’t.  

Now, who knows what we’ve really done to our economy.  We’ve printed almost a trillion dollars!  When will this inflation of the money supply hit us?  What’s going to happen to the dollar in the eyes of the global economy?  If they don’t let the house of cards fail now, when is it really going to collapse and how much harder is it going to fall?

Sure, this is the most troubling economic time I’ve ever faced, but what’s even more troubling is the actions of the government, under the blanket of “what’s good for Main Street,” and how they are going to effect our way of life.

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