Spending Our Way Into Oblivion
By Harris R. Sherline
October 20, 2008
Page 2 of 2
When this happens, people refuse to hold their own nation's currency and convert their money to other assets that they believe will hold their value as their currency continues to rapidly depreciate. In Argentina, wealthy citizens tried to deposit their money in American banks or they bought stock in American companies. The less wealthy attempted to hold U.S. $100 bills or bought houses or gold or commodities, such as rice -- anything to get rid of their pesos. They also tried to offset the consequences of unbridled inflation by indexing contracts, which adjusted payments to compensate for the rise in prices over time.
The bottom line is that the currency of a nation that is experiencing runaway inflation becomes worthless, productivity decreases, capital takes flight, and there are a variety of other consequences, such as the government refusing to redeem the bonds it has issued, etc.
The U.S. is rapidly headed down this track. Running continuous deficits and issuing bonds far in excess of our ability to pay is the beginning of the cycle. We've been doing this since WWII, and Americans instinctively know that it's not right. They may not be financial experts, but they know a con when they see one, and most of them seem to recognize what's happening now with the "$700 Billion Bailout" and have been protesting very vocally. Unfortunately, only a few members of Congress have been listening.
It's not too late to stop the train, if common sense is allowed to prevail. If not, we can only look forward to more and higher inflation, just as in Argentina or Zimbabwe, with all the consequences that go with it.
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NOTE: Read more of Harris Sherline's commentaries on his blog at "opinionfest.com.
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Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA. >> Back -- Page 1 2
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