The principal problem with the current economic crisis is that the authorities are trying to solve the debt crisis by adding more debt — which is akin to trying to cure a viral infection by injecting more viruses. In case some have forgotten, the United States is undergoing a serious credit crisis, that is, a debt crisis.
One of the more depressing Twitter accounts available for your following pleasure is @NationalDebt, which regularly updates with — you guessed it — a tally of our current indebtedness. The most recent tweet? $11,658,212,708,636.47. And that’s just the government’s debt.
All sectors of the American economy are suffering from a chronic addiction to credit, which manifests itself as the disease of excess debt. Household, business, and public debt have reached all-time highs. Consequently, it would not seem logical for the federal government to fight the debt crisis by adding trillions of dollars to the national debt and by lowering interest rates to promote even more credit.
Everyone else is in debt too. We’re in debt, and our businesses are in debt, and our government is in debt, and the solution is…more debt? Contrary to what Bernanke, Geithner, and the president would like you to think, no.
A debt crisis can only be solved by paying down and reducing debt; it cannot be solved by compounding ever-more debt on top of an extremely overleveraged economy.
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