You Can't Save Your Way Out of This Hole

October 09, 2008

It's interesting to hear the candidates debate. They are both going to cut unnecessary wasteful spending. They always say that. People want to hear that. People actually believe it.

Here's something to think about however. We are about $500 billion short of money per year now. Everyone now admits that this period of easy lending and excessive borrowing was unsustainable, yet during this whole time period when the economy was running on all of this phoney virtual wealth, we still ran huge deficits.

Those days are gone now. Even if Bernanke and Paulson keep the economy from melting down, there is not going to be any easy money in the future to artificially float the ecomomy. So if we ran $500 billion short as trillions of dollars in phony "toxic paper" was being created, how are things going to balance out when we actually have to pay for things with real money going forward.

The numbers are massive. There's no way we can simply make up this difference by simply cutting waste. I wish it were that easy.

The economy is going to have to create some real wealth from somewhere. Printing money won't fix it. Raising taxes won't fix it. Freezing spending won't fix it.

-- Greg