Your Dollar is Worth 50 Cents, Part 1

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That’s what you will be hearing in 1 to 3 years if the government can reach a compromise and pass the $700 billion bailout bill. Actually, you won’t be hearing that, because the government does not want you to know how seriously their “bailout” plan will affect the American economy.

According to Wikipedia (http://en.wikipedia.org/wiki/United_States_dollar), in 2005 $760 billion were in circulation, with one-half to two-thirds held overseas. If the government invents $700 billion to bail out the poor decisions of the financiers, the value of our dollar will essentially be cut in half.

But the government doesn’t have to invent the money, do they? Our government has the money already, right? After all, they wouldn’t be spending it if they didn’t.

Afraid not, folks. Economics 101: money is a closed system. If you inject more money into the system, the value of each unit drops. Assuming the figures on Wikipedia are right, everyone in the entire world only holds US$760 billion. If we take the pessimistic approach and assume that two-thirds of our money is held overseas, we (you, me, Congress, the guy with the noisy dog next door) only have a total of about $254 billion.

The government promises that we can “make up” the difference over the next 3 to 5 years. The heroic government will swoop in, take away all those bad debts, and hold them until the economy improves. Then they will sell those debts (aka the houses everyone defaulted on) back to us and it won’t affect taxpayers one bit.

If you believe that, I have a great bridge to sell you. Anyone with basic math skills has got to wonder how this reasoning is supposed to work. We know the government doesn’t have $700 billion. Thus, they have to invent the money. And then they expect us, the American people, to give them real money for their fake. It would be like me loaning you an imaginary dollar, then asking for a real dollar in payment the following week.

So what should we do? It’s easy to poke holes in plans, but no one ever suggests an alternative. Check back for part 2, which will outline one person’s idea.

2 thoughts on “Your Dollar is Worth 50 Cents, Part 1

  1. Great article Angela. I totally agree with you. We are in a horrible mess and I only hope there is a way that doesn’t only hurt us more! As Albert Einstein once said: “Problems cannot be solved at the same level of awareness that created them.” Our government needs to get more fresh “minds” to come up with a better solution. Here is an interesting suggestion submitted by a Utah mom to Fox news: http://community.myfoxutah.com/blogs/dmama7/2008/09/26/Economic_Crisis_Solution.

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