Obama says that for far too long, America has consumed more than its share of resources. He’s right. But unwittingly so, and not in the way he thinks. Put simply, America consumes more than its fair share of resources because it borrows money to pay for its consumption. When we borrow to subsidize our sumptuous lifestyle, someone else has to lend, i.e., not consume.
Individual Americans have contributed to the problem through personal debt, but we are gross amateurs before the American government. In order to fund its profligate spending, the American government uses a secret weapon–inflation. The government owns a printing press through the Federal Reserve. As it borrows, it also prints more money to pay its debts; you could say that the government has a monopoly on counterfeiting. Printing more money causes existing money to be worth less, which would ordinarily cause massive inflation.
Happily for the American government, the dollar is the world’s reserve currency, which means that international trade is priced in dollars. In order to keep inflation down in America, we exported the inflated dollars by selling government bonds to other governments, primarily China. Only China isn’t buying anymore.
And that brings us back to the opening statement. We ARE using more than our fair share of resources, because we have conned the world into loaning us the money to buy them. Loans that we intend to pay back in inflated (counterfeited) dollars (and lately it seems, with no intention of every paying back). Obama has NO intention whatsoever of actually remedying the situation. If he meant his “good citizen of the world” rhetoric, he would order the Fed to stop printing money, or better yet dissolve it altogether. He would stop issuing government bonds. He would end deficit spending. He would encourage Americans to stop borrowing to fund their lifestyles. Unfortunately, Obama is doing the exact opposite. He sent Secretary of State, Hillary Clinton, to China to beg them to continue buying our debt. The Fed has ramped up money printing even more with no end in sight. Obama’s first year budget deficit will be more than twice as large as Bush’s last (even including the bailouts). And he is still encouraging Americans to borrow and consume.
The sad fact is that it did not matter who was elected in November; the underlying cancer in the American economy, the inflationary policy favored by the government and the Fed, was not going to change. You will notice that McCain campaigned for the bailouts. Bush said he had to abandon the free market to save it. And Obama? Obama is simply following the trail laid out by Bush and all the presidents before him back to 1913 when the Fed was established.
If this has piqued your curiosity, I highly encourage you to read Murray Rothbard’s short book What Has Government Done to Our Money. It can be downloaded for free from www.mises.org. For those of you with an aversion to books without pictures, search youtube for Irwin Schiff How an Economy Grows. (It’s a narrated graphic novel.)