Everyone should be paying attention to what is going on in Europe right now. It was announced today that the United States Treasury will ramp-up its printing presses as part of a global effort to flood Europe with cheap dollars. Why? Because several European Union countries are on the verge of fiscal collapse, and if they fail the impact on healthier European Union countries and the world at large will be significant. Central planners believe that flooding Europe with cheap dollars will go a long way towards averting (or in my opinion postponing) the deepening of the current financial crisis.
How did we get here? Good intentions. Voters in Europe had good intentions when they supported the entry of their countries into the European Union. Voters also had good intentions when they voted to grow the size and scope of government in response to the needs of its citizens. But when voters make decisions without applying reason and logic, big mistakes like this can happen. Read: They should have listened to Milton Friedman.
Why should we (Americans) care about what’s happening in Europe? For one, you are facing a retroactive tax. The value of every dollar you have in your wallet or bank account will decrease. Yes, in order to bail out the voters in Europe who made bad decisions, you, your families, your friends, and your companies will see a decline in the purchasing power of their dollars. Read: inflation. The other reason you should care about this is that the ratio of debt to gross domestic product in the United States is now 100% and growing. That’s alarming.
European countries like Greece and Italy are imposing drastic cuts on the services its government provides to its citizens, but they are too late. That’s why we are bailing them out. But who will be there to bail out the United States if we fail to shrink the size and scope of government before it’s too late?
I don’t see this as a political issue – the blame should be shared universally among political parties and voters alike. It’s a common sense issue. The United States is $15 trillion in debt, and what we have learned from Europe is that there is only one practical way to reduce that debt over the long-term: Spend less.