Because They're Allowed To

by TOM MCLAUGHLIN February 8, 2013

Lots of things caused the Great Recession we're in, but the biggest was the subprime mortgage crisis. And what caused that? Government meddling in the housing market, that's what. Guess we'll never do that again, right? Wrong. We're at it again and this time it's worse.

The full faith and credit of the United States of America - which used to mean something - is getting behind mortgages for up to 150% of what a house is worth. Yes, you read that right. Our brilliant federal officials are guaranteeing mortgages to underwater homeowners for more than their houses are worth! It was bad enough that our government caused the housing bubble by strong-arming banks into writing mortgages to people who couldn't pay them back. Now that housing prices have tumbled and foreclosures have gone through the roof, our government is propping up what's left of the housing market by pushing 150% mortgages with all of us on the hook for them.

Oh and by the way: we're more than $16 trillion in debt. That means we're the absolutely biggest debtor nation in history and getting bigger by the hour. So what are those geniuses we elected to the White House and Congress doing about this? Furrowing their brows and pretending to do something while making it worse all the time. They keep borrowing, and now 70% of our new debt is "purchased" by the Federal Reserve. For you low-information voters who gave Dear Leader his second term, here's a little economics lesson:

When the US Government borrows money, it issues bonds. Think of these bonds as IOUs the government gives to people it borrows from. Remember the US Savings Bonds your grandmother gave you for your birthday? Those pieces of paper didn't represent the US saving anything. They represented the US borrowing from your grandmother and promising to pay back whatever number of dollars it printed on the bonds. They were IOUs with interest. Got that? Our government was going further into debt and Grammy believed it would pay her (or you) back.

Well, that belief about the US Government's ability to pay back what it borrows has been shaken severely. The rest of the world is nervous about the financial stability of the US Government and you should be too - but clearly you aren't, or you wouldn't have voted for the Dear Leader.

When Treasury Secretary Tim Geithner issues bonds, (tries to borrow more trillions of dollars), buyers say "Uh-uh. No way am I going to lend you any more money. Not for that low interest rate." However, the US Government isn't about to let interest rates go up because that would hasten its bankruptcy.

So what does it do? It hints to Bald, Bearded Ben Bernanke - Chairman of the "independent" Federal Reserve - that it needs more "Quantitative Easing." And what the heck is "Quantitative Easing" you may ask? It's Bald Bearded Ben creating trillions of dollars out of thin air. He's printing monopoly money. When he denies that the "independent" Federal Reserve prints money, he's not telling the truth. Oh, technically he's right. The dollars he's creating out of thin air are not paper dollars or what we call "hard copy." They're digital dollars.

We all know people with huge credit card debt. How did they get there? Did they pass hard-copy dollars when they bought things? No. They used digital dollars. When they reached their debt ceiling, what did they do? They got another credit card and rolled their debt over onto it. Did any hard copy dollars change hands? No. They continued doing this as long as they were allowed to. Let me repeat that: As long as they were allowed to. This is what the US Government is doing through the Federal Reserve - rolling old debt into ever-increasing new debt. How long will they continue doing this? As long as they're allowed to.

And who allows them? We do.

Now think what would happen if people with huge credit-card debt obtained printing presses that could print dollars - or super computers that could create digital dollars - without going to jail. What would happen to our economy with all that funny money in circulation? It would collapse, right? But that's what Bald, Bearded Ben Bernanke is going at the Federal Reserve in his third round of printing/creating dollars - that he calls "Quantitative Easing."

Low-information voters gave us the Ivy-League educated, government leaders who assure us that all this is okay because they know what they're doing. Barack and Ben must know what they're doing because they went to Harvard, right? They're smarter than the rest of us and we've put our faith in them, so everything will be all right, won't it?

Dream on.

The economic mess Dear Leader inherited from Bush is nothing compared to what he's inheriting from his own first term. Contributing Editor Tom McLaughlin is a (now retired) history teacher and a regular weekly columnist for newspapers in Maine and New Hampshire. He writes about political and social issues, history, family, education and Radical Islam.  Email him at


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