Lawson for Congress

That’s a handy number to store in your cellphone. President Bush was giving it out today while visiting folks devastated by the San Diego fires. While reading the article on President Bush’s San Diego visit in the New York Times, however, my mind immediately jumped back to a CNBC article on oil prices that I had just finished reading. See if you can detect the link between these two quotes:

Mr. Bush, who seemed guided by the ghost of Katrina, when his administration was accused of doing too little too late to help hurricane and flood victims in the New Orleans area, today came bearing both the purse and the urgent compassion of his office to help fire victims.

U.S. light, sweet crude rose 64 cents to $91.10 barrel in Globex electronic trading. Energy officials from OPEC nations Venezuela and Algeria said the producer group will not boost output when it meets informally in Saudi Arabia next month. “The high prices are not coming from a lack of production,” Algerian Energy Minister Chakib Khelil said. OPEC’s secretary general also said on Thursday there was no shortage of oil and added the weakening dollar was damping the windfall from record high prices.

Get it? The U.S. dollar isn’t buying as much oil as it used to. It’s not that oil prices have just gone up, it’s also that the value of the dollar in terms of all commodities, and other fiat currencies, has gone down. That’s inflation caused by debasement of our currency.

President Bush has discovered that money doesn’t grow on trees. In fact, getting money is even easier than that. If you want money for anything — war, disaster relief, pharmaceuticals for senior citizens, or even health insurance for children (whoops… not that last one, sorry) — all you have to do is sell more Treasury bonds. No need to wait for something to grow, you just issue more debt.

The best part is when a bond offering doesn’t have enough buyers, the Federal Reserve itself will pick up the slack and buy the bonds from the Treasury Department. Just look at the press release below: the Fed took $2.5 billion in today’s auction of five year notes. Where does the Federal Reserve get the money to buy that bond? They just write a Federal Reserve Check to the U.S. Treasury, but there’s no money in any account to cover that check. Try doing that yourself — you won’t like the results, as you’ll likely end up in jail.

The net effect of our government’s massive spending is that the Federal Reserve is creating a lot of new money. As a result, we’re driving our currency into the ground. The new dollars given to those devastated by the San Diego fires will buy less than the dollars given to those devastated by Katrina. And the dollars you are using to buy your groceries are worth less, as well.

When will people realize that our federal government cannot help us any more? They’re broke, they’ve created a national debt of over $9 trillion, and further attempts to “help” by creating more money are only making things worse.

For a more detailed discussion of how our monetary system works, check out this engaging documentary:

This entry was posted on Thursday, October 25th, 2007 at 8:54 pm and is filed under debt, inflation, monetary reform. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.