“When the people find that they can vote themselves money that will herald the end of the republic.” That is a direct quote from Benjamin Franklin, and it has turned out to be quite prophetic. Today, most of our politicians are socialists whether they accept that label or not, and the American people have come to expect the government “to do something for them” whenever any sort of a crisis comes along. In response to this COVID-19 pandemic, Congress has borrowed and spent trillions more dollars that we do not have, and most Americans have been quite thrilled to receive their “stimulus checks”. But of course now a lot of people are insisting that those checks were not enough and they want more. In fact, one new survey just found that most Americans want the checks to keep coming. The idea of “free money” is so seductive, but unfortunately most of the population simply does not understand that eventually there is a great price to be paid for throwing “free money” around.
So far, more than 300,000 people across the globe have died during this pandemic. But during the Spanish Flu pandemic that stretched from 1918 to 1920, somewhere between 50 million and 100 million people died. During that horrific pandemic, our society did not shut down and the federal government did not borrow and spend giant mountains of money in a desperate attempt to keep the economy afloat. Instead, our leaders responded with common sense and quiet resolve, and it set the stage for a tremendous economic boom during “the Roaring Twenties”.
Unfortunately, this time around our leaders responded to COVID-19 by locking down nearly the entire country, and that is going to result in the largest GDP collapse in American history…
In its latest projections, the CBO sees GDP capsizing 38% on an annualized basis in the second quarter with the 26 million more unemployed Americans than there were at the end of 2019.
The forecasts are roughly in line with Wall Street economists and slightly less dour than the most recent tracking number from the Atlanta Federal Reserve, which sees GDP falling about 42% in the April-to-June period.
Without a doubt, we are now in a very deep economic depression, and the months ahead look very bleak.
But instead of focusing on solutions, many Americans are desperate for the federal government to take care of them. According to one recent survey, 82 percent of Americans want the government to issue more “stimulus checks”…
A whopping 82% of people feel that the one-time stimulus check of $1,200 is not enough to cover their expenses. They feel that these checks should continue until the lockdown ends.
I have a hard time believing that number is actually that high, but even if you cut that number in half it would still be astounding.
Have we now reached a point where much of the nation is eager to embrace full-blown socialism?
Apparently so, and that is quite discouraging.
But the “free money” that socialists promise is never actually free.
When the Federal Reserve creates trillions of dollars out of thin air and pumps it into the financial system, that is not “free money”.
And when the federal government borrows and spends trillions of dollars that we do not currently have, that is not “free money”. In essence, we are stealing that money from future generations of Americans, and what we are doing is beyond criminal. For much more on that, please see my recent article entitled “Fear Of The Coronavirus Has Absolutely Destroyed America’s Future”.
Whenever a new dollar is introduced into the system, it erodes the value of all dollars that currently exist. Usually this is a relatively slow process, but now our leaders have gone absolutely nuts and very painful inflation is on the way.
In fact, in some sectors of the economy it is already here…
Harold’s Chicken on Broadway in Chicago unleashed a wave of public backlash on social media last weekend after it slapped customers with a COVID-19 surcharge of 26%.
Restaurant manager Jacquelyn Santana told CBS Chicago that food suppliers raised wholesale chicken prices by 26% on Saturday “due to the COVID pandemic.” She said a case of chicken wings that generally cost $60, jumped overnight to $90, forcing the wing shop to pass on the costs.
The cost of living is going to be soaring, and most Americans will not be seeing matching increases in their paychecks.
In fact, more than 36 million American workers no longer have a job at all.
Things are about to get really tough for average American families. Some are going into more debt in order to get through this crisis, while others are dipping into their retirement savings…
MagnifyMoney commissioned a survey of 1,239 Americans who have retirement accounts. Many of the analyses conducted look at responses by the “generation” of the responders. Gen Z is defined as ages 18-23, Millennials are 24-39, Gen X is 40-54, Baby Boomers are 55-74, and the “silent generation” is aged 75+.
The survey shows that 30% of Americans have withdrawn an average of $6,757.20 from their retirement savings from about March 1 through May 1. Another 19% responded that they have not taken money out yet but they plan to do so.
As time goes by, an increasing number of Americans will eventually come to a financial breaking point, and there will be a tremendous amount of pressure on the government “to do something” once again.
And just like we have seen with so many other socialist experiments, the answer will always be more “free money”.
But to see where this ends, just look at Venezuela. Nearly everyone in the entire country is a “millionaire”, but nearly everyone in the entire country is also living in deep poverty.
Once faith in a currency is destroyed, it is nearly impossible to restore it.
And we are in the process of destroying faith in the reserve currency that the entire world uses.
Unfortunately, our leaders are not listening to people like me. Instead, they are willing to try just about anything to turn the collapsing U.S. economy around.
At this point, even Federal Reserve Chair Jerome Powell is admitting that this is the worst economic downturn that we have seen “since World War II”…
The pair offered a cautious view of the economy, with Mnuchin displaying a more optimistic outlook than Powell, who told the Senate Banking Committee that “the scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II.”
Mnuchin noted that he anticipated the economy would recover but said “there is risk of permanent damage” should states wait too long in reopening their economies.
Sadly, things didn’t have to get so bad so soon.
If our leaders had responded rationally to this pandemic, the U.S. economy would still be in relatively decent shape.
But now our economic bubble has burst, and very challenging days are ahead of us.
As our problems mount, a lot of people are going to insist that “free money” is the solution.
Of course it isn’t any sort of a solution at all. “Free money” is actually economic poison, and the U.S. economy is never going to recover from this.