IN October, the U.S. Congress passed a continuing resolution, which among other things, enabled the federal government to again raise its debt limit. Much of the media immediately praised the action, as the shut-down "crisis" was finally over, and the government re-opened for business.
However, little attention was given to the real crisis, a much deeper problem that is being disregarded within the beltway of our nation's capital - a true catastrophe that is also being utterly ignored by our own state's oblivious federal representatives.
Within 24 hours of this debt resolution sailing through the Congress, over $350 billion were borrowed - and the government's debt now officially stands well over $17 trillion. This is to say nothing of the untold trillions of dollars in unfunded liabilities the American taxpayer is expected to cover well into the future. As staggering as these numbers may be, very few in Washington, D.C. understand the magnitude of this national dilemma.
This predicament grows even more dangerous once another little known fact is revealed. The trillion dollar deficits our government is continuing to spend are no longer coming from real "borrowed" money. The Chinese are no longer lining up to purchase American treasury bonds, and lend our government their savings. Despite popular opinion, very few foreigners are loaning money to the American government now.
So where is all of this "borrowed" money coming from?
Over the past several years, the largest buyer of American debt has now become the Federal Reserve, our country's central bank. To permit the federal government to desperately cling to spending money it doesn't have, last year alone the Federal Reserve purchased over 75 percent of all U.S. Treasury bonds. What does this mean?
To be clear, the Federal Reserve has zero resources at its disposal. So when the Fed steps in as the "lender of last resort," and buys U.S. government debt, new dollars are being created out of thin air.
In essence, the only thing the Fed does have at its disposal is the printing press, and this has become the new norm in Washington, D.C. The printing press is running at full speed ahead. Since 2008, trillions of new dollars have been "printed-up" to lend to the federal government, as well as to finance large, politically-connected banking institutions - in order to maintain some semblance of "solvency." Wall Street is booming, and so is Washington.
Turning to the printing press though is a dangerous notion, and a perilous path Washington D.C. has set its sights on. But this is nothing new. History is ripe with various government regimes utilizing the printing press as a means to grow government power.