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For the most part, the people that I talk with on a daily basis are worried about inflation. The prices of everything people are buying is going up. Gas , groceries, and entertainment just to name a few. People are starting to have to make tough choices where their money is concerned. But inflation is not always a bad thing, for example inflation can cause wages to to up in the form of cost of living increases.

Starting last year, reports of home foreclosures started to come up all over the country. People were getting loans they could not afford. This led to what is now called the housing bubble collapse. Banks began to foreclose on many, many people. Some of this is to blame on bad banking and lending practices, some is to blame on Congress and the current administration for lifting regulations that kept lenders from doing just this. All of these things have led to a new financial sector collapse.

Our government has responded to these crises by first “bailing out” Bear Stearns. Then the Fed opened what it called the discount window, whereby other lending institutions can borrow money from the Fed, even though they may be at high risk to failure. Now our sympathetic politicians, wanting to help people who are loosing their homes, want to bail out Fannie Mae and Freddie Mac – the two biggest backers of first time homeowner loans. The printing press ant the Fed are really humming now.

Where does this money really come from. Well as mentioned before, the Fed prints more money, which is backed by taxpayers. Some money we actually borrow from international banks or foreign countries and give them an I.O.U., still backed by taxpayers. Here is the really crazy part: the politicians, who are wanting to help the people that are forced into the streets, are not helping them at all. Every afore mentioned lender and every other major lender that back home loans are publicly traded companies. The shareholders who, knowing risks are involved, are tho ones who will actually get bailed out. THE CHINESE GOVERNMENT IS THE #1 SHOREHOLDER IN FANNIE MAE AND FREDDIE MAC!!! source here

The real problem facing America is not inflation, but deflation through the devaluation of our currency. The more I.O.U.s American makes (nearly $10 trillion to ourselves and $25trillion to foreign governments) and the more paper money we print, the less faith people have in our currency. It will take more and more dollars to buy the same amount of stuff until no one will accept them at all. A few currencies are already worth more than the dollar. It is getting harder and harder to exchange the dollar for goods in other countries. An economic collapse is eminent if we don’t change the way we do business now. Some are saying it is already too late.

So while our politicians are lining up to see who can give or spend the most money, be sure to keep some matches handy so you can at least keep warm when cooler weather sets in.

This entry was posted on Thursday, July 24th, 2008 at 9:10 pm and is filed under America in Crisis. 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.