Despite the seeming complexity of the programs, the government’s strategy for battling the financial situation is pretty straightforward.
The idea is to transfer as much private debt as possible to the federal government, betting that the government’s balance sheet can sustain the added leverage. Eventually, the private sector, free from all the debt it’s built up, is expected to return to growth — with the help of some new bridges, high speed rail lines and other stimulus goodies.
There are basically two ways the government can buy up all this debt. It can borrow the money, in large part from foreign sources, or it can just print it up and create rampant inflation.
Inflation is considered an economic evil, so that’s kind of a last resort. For now, we’re blowing out the national debt.
But while the current choice delays the pain — the money we’re borrowing is practically free, inflation is the more moral path.
Inflation is basically a tax on savers. It means those who didn’t partake in the last bubble will be penalised in order to prop up those who did — homeowners who overextended themselves, banks, etc. It’s a sign that the government’s been captured by false elites.
But at least this tax would fall upon current voters. Borrowing, on the other hand, means that at some point in the future, a major tax will have to be levied. But that tax may felt by people who aren’t even born yet. Their government will ask them to pay for choices made when they couldn’t vote or register disapproval. This is clearly a worse strategy in a democratic country.
At least by inflating now, the onus is on the current population to register its disapproval and perhaps put a halt to all the bailouts. If we see the value of our dollars vanish, then it’s on us. And after all, we elected the people making these decisions. We should pay for our choices.
Inflation is a horrible thing. You can’t make society wealthier just by printing up currency. But at least you can penalise the right set of citizens.
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