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Borrowing on Our Future

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Bailout means much higher taxes or much lower dollar for our children.

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Minyanville's Why Wall Street Will Never Be the SameDear Taxpayer,

As the US government is in its final hours, or days, or weeks of deciding what it will pass as a bailout plan(s), I wanted to send this special message to you.

First, I'm not talking to Americans over the age of 20. When Congress bends its proverbial knee to taxpayers, it does so strategically. What allows it to bamboozle most citizens into fiscal irresponsibility is that current voters are either consciously or unconsciously in on the game. All Congress really has to do is keep fooling future voters, the very young and innocent, for that's "our" real prey.

Congress is not going to tax current taxpayers for the bill on this or any other bailout. Both candidates are promising tax cuts already. So who is really going to pay for all this? With the US public debt around $11 trillion -- and with unfunded future obligations an additional $50 trillion -- Congress certainly doesn't have the "cash" to pay for anything.

Not to worry - they're going to get the "money" where they usually get it, and in the same way that caused this crisis: They're going to borrow it. They're going to borrow it mostly from Asian central banks: Even if they don't want to lend it, they'll be forced to through a massive devaluation. But borrow it we will - and no one of current age really cares, because we aren't the ones who'll have to pay it back.

So it's to you, future taxpayer, that I really write this letter, and give the following advice: Learn as fast as you can about economics and about the world and its politics...About what and who is taking away your future standard of living.

When Congress votes to "use taxpayer money" to bail anyone out, it isn't "our money," but "your money"; our generation is borrowing your future from you. You will pay for all of this either through much higher taxes or a much lower dollar, 2 sides of the same coin.

Government will use your money for completely unproductive things -- like supporting the stock prices of banks -- but not for productive things, like researching energy to any serious degree. It always turns out that way.

Some lessons won't be easy to learn. For example, slipped into the bailout bill is something that is gibberish to most, but probably one of the most important things to happen to the murky world of central bank finance: The Fed now has been given the ability to pay for deposits.

Innocuous as that sounds to most, it is anything but: It now allows the Fed to expand its balance sheet to infinity. I'll let you study why that is, but suffice it to say, the Fed now has in its power the ability to totally debase the US dollar. That's very important to you, because you're going to be earning future dollars.

Unfortunately, that's all the advice I have for you - other than don't listen to older people.

Also: I'm sorry.

Sincerely,
Mr. Practical.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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