Tuesday, August 24, 2010

More Borrowing What Hasn't Yet Been Produced

Here, the WSJ chronicles the massive federal spending explosion since BHO and company took office. And just in case you were wondering, all that spending by the U.S. Treasury will likely come from new money created by the Fed, not from taxes or from the savings of households who choose to buy U.S. Treasury bonds with their saving.

But spending financed with new money is an attempt to borrow what has not yet been produced. As I've noted on more than one occasion, (here, for example) you can't borrow what hasn't yet been produced. Attempting to do so results in an economic mirage.  The latest example was the housing bubble that led to the great recession we are still trying to escape.

The growing red ink generated by BHO and his Democrat controlled Congress will not result in greater production of real goods and services.  And without greater production of real stuff, the unemployment numbers will continue to languish.

BHO's economists know what's going on.  But most of them continue spouting the party line.  All but Christy Romer, BHO's former Chair of the Council of Economic Advisers bailed.  I always knew she is a smart lady.

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