Economics:

"Obamanomics: Inflation, the economy, and you."
-An article by Nero 

President Barack Obama likes money. He likes to spend it, lend it, and print it faster than you can say the phrase “deficits we can never repay”. In order to help cover the costs of the massive loans the U.S. Government plans on making to help float banks, insurance companies, the auto industry, healthcare reforms and a laundry list of other items, the U.S. government has begun printing and injecting nearly 1 trillion dollars into the U.S. economy. Now someone not versed in economics (or now, Obamanomics) might wonder, “Why is that such a bad thing, if the U.S. needs cash, doesn’t it have the ability to print as much currency as it needs?”. The technical answer? Yes, since the U.S. no longer ties it’s currency to something that’s actually valuable (gold, for example) it has the ability to create as much currency as it deems necessary. Does this mean printing trillions of dollars is a good thing? No, God no. To explain why, I think it prudent to provide a brief definition of the phrase inflation as well as a brief example of the Federal Reserve system.

In 1913, the U.S. passed the Federal Reserve act creating a current total of 12 Federal Reserve banks. The Federal Reserve, in a sense, is a lender to banks. The Fed is responsible for numerous aspects of the economy, with it’s chief purposes being a “lender of last resort” to banks in need of cash as well as a controller of currency in the U.S. economy. The Fed is a tool of the Federal Government: by controlling the amount of hard cash a bank is required to keep on hand at all times as well as how much currency is in the U.S. by the lending of cash (cash going into the economy) and the selling of federal bonds (taking money back out of the economy to lower the amount currency) the fed attempts to keep the economy stable, which involves allowing a manageable amount of inflation.

The word inflation relates to the general worth of goods in an economy in relation to how much currency is circulating within it. A brief example: suppose a small economy consists of 100 dollars and thus the price of oranges stand at one dollar apiece. If the Fed of this economy were to inject 100 more dollars into this small economy, it’s logical to assume that the price of Oranges would increase to two dollars, reflecting the increase in inflation. Now all economies at all time contain some level of inflation, it’s impossible not to have any (unless you get by without currency of course). But inflation is problematic: too much inflation can lead to the damaging of a nation’s currency (think about it, the more money one has in an economy, the less it is worth and thus the more expensive goods become). And inflation can be damaging to an economy in a way that Americans tend not to imagine. Example: Zimbabwe.

The African nation of Zimbabwe currently suffers from the worst amount of inflation in the world, and possibly in the history of mankind itself. This amount of inflation is largely blamed on “President” (And I use that term loosely) Robert Mugabe, who has held power in the country since 1980. Beginning in February of 2000, Mugabe’s government abandoned the long standing “one-buyer, one-seller” land reform action (which had worked to mixed success in both Zimbabwe and Kenya) and passed constitutional amendments seizing land from white landowners and effectively gave it to friends of the government. The result? The economy went into freefall as those rewarded with land had no idea how to effectively farm and manage their newly acquired land, causing hyper-inflation that resulted from Mugabe printing banknotes in order to try to fix the economy his “reforms” effectively killed. Zimbabwe is the only nation I know of that prints trillion dollar banknotes for everyday use. Today the people of Zimbabwe enjoy endless poverty and starvation as few can afford food with a currency rendered worthless by inflation.

Now you may say, “that has nothing to do with the U.S., our Savior Obama could never screw up our economy that bad or order such ridiculous reforms”. I only use Zimbabwe as an illustration of inflation at it’s worst and if it’s unchecked, this is an extreme example (and one unlikely to happen) but I can provide a closer one: The United Kingdom.
England is facing a recession just like the rest of the world, but they are having it harder than any other nation in Europe. You see, since the socialist Labour Party took over the government in 1994, they’ve enacted numerous policies that have not only caused inflation within their country: but the British pound has devalued nearly 30 percent since the last decade. In a speech condemning the actions of Prime Minister Gordon Brown (which was given to his face and is quite entertaining, I suggest watching it on youtube) European Parliament Representative Daniel Hannan, of Southern England and the Conservative party, stated that his country’s policies have succeeded in bankrupting the bank of England as well as setting England up for a slower recovery from the recession that we all now experience. Because of Britain’s excessive debt, they now compete for loans from nations like China (who, of course, charge a great amounts of interest) in order to fund their programs, and he believes they may have to pander to African nations such as Nigeria and Zimbabwe (good luck!) for new money.

Unlike the Zimbabwe situation, this scenario is a possibility of what America’s future looks like. We are already borrowing large amounts of money from China while we print more and more money (that’s worth less and less). And because we’re at the back of the borrowing line (as well as the fact that China’s economy is slowing due to the recession) we may find that no one is willing to cut us a check unless we really (and I mean REALLY) make it worth their while, and I don’t even want to know what the interest rate would be on a check like that.

The point here is that President Obama in not making viable solutions to our economic woes, and he is misusing economic tools. Printing money is not a horrible thing, but it is not a fix-it-quick scheme either. An example of a good use for newly created currency would be during a natural disaster where our allies or ourselves would need quick cash to handle a problem, with the idea that bonds be issued to try to get the money back as soon as possible. Instead we’re trying to solve a financial crisis by throwing money at it. Right now we should be attacking the recession like someone would hammer a nail into a board, President Obama seemingly wants to try a sledgehammer, pouring more money into the economy and devaluing a dollar that is already the laughingstock of the world economy.

The amount of inflation that is going to result from this spending spree is going to be felt by all of us, we will watch as our prices for food, gas, and other manufactured goods rise and our newly cut stimulus checks succeed in barely covering these higher prices. If we continue to spend money on banks that won’t lend and “infrastructure projects” that seemingly wish to turn us into a nation of construction workers, we could face an even weaker dollar and thus an even weaker economy. President Obama is setting America up for a bigger fall, one that could dwarf our current recession fears.