Cash for Clunkers, a Highway to Hell

By: Victor Riesco Article Font Size

Last week, the Senate approved an extra $2 billion dollars to extend the popular, if senseless, cash for clunkers car rebate program. On Friday, Obama signed the bill.

It’s working, luring consumers into car dealerships like sheep.

Yet it’s sad to see the American people being bribed by their own government, and with their own money no less, and spending their savings and burdening themselves with yet more unproductive debt.

It’s an unavoidable and undeniable fact: All the money the government is using to stimulate the economy is being funded with federal debt which in turn will have to be paid by Americans through higher taxes (which are coming for sure) and by the destruction of the purchasing power of the dollar.

Since March 18, the Fed has been monetizing federal debt (translation: printing new money out of thin air) in order to keep interests artificially low and to help fund gargantuan fiscal deficits. This has tanked the dollar index to 79 from 87 at its close last Friday. In less than 5 months, the dollar has lost 10 percent of its value.

Sure, in the near future we might get some “growth” thanks to all the fiscal spending and massive money printing. These factors have also benefited stocks, causing them to rally from the March bottom. Uncle Sam is using his credit card to prop up the economy, but it is only a matter of time until he maxes out, so don’t expect a sustainable recovery.

Remember, real economic growth comes from production and savings, a path to prosperity that the government is studiously avoiding.

Instead, they are busy building an express lane to a bigger and sadly inevitable new economic crisis. Sustaining a debt-and-consumption economy forever is mathematically impossible. It will end, and badly.