Since we know that the Federal treasury doesn't have to worry about running out of money (no limit to the printing press or ones and zeros on a computer), the more important question then becomes this one:
Does the U.S. government have to worry about running out of credit? Now that's a good question!
Today's action substantially increases the risk that the U.S. government's credit rating will be adversely affected, and that eventually, interest rates will go higher. Today's bailout of the mortgage industry is a short-term attempt to shore up confidence in the financial system. However, it simultaneously sews seeds of longer-term erosion of that same confidence. As other debt sectors, including credit card, auto loan, and corporate debt also shows signs of stress in the coming months, what will happen then? At some point, more bailouts will no longer be an option, because the capacity of the U.S. government and the taxpayers will no longer be able to provide support without straining the economy and collapsing the underpinnings of our financial system. We are rapidly approaching that point!
If a train is chugging toward a chasm, and the bridge over than chasm is out, would it be wise to increase the speed of the train in the hopes that the train might be able to magically fly across the chasm? It will be quite a spectacle; it will even be very exciting, but it won't be a pretty sight!
If a train is chugging toward a chasm, and the bridge over than chasm is out, would it be wise to increase the speed of the train in the hopes that the train might be able to magically fly across the chasm? It will be quite a spectacle; it will even be very exciting, but it won't be a pretty sight!
