Many of us do not understand why governments are going into debt to stimulate the economy. It is not an easy decision to go into debt, but when governments must go into debt to stimulate the economy, it is usually for one of the following reasons.
1. To pay off old debt from when the economy was stronger and the debt could be sold.
2. To pay down debt that has built up during a recession, trying times and times when the economy is depressed.
The interest payments on the debt build up at the end of the year and the government default. No money is coming in to pay this debt.
It is usually hard to get governments to stay in debt for more than one year. The interest payments are usually too high and the economy gets to a point where a recession is inevitable, unless there is a sudden surge in money coming into the government to pay down the debt.
It is a matter of time before the governments default on the interest payments and the economy begins to slow down.
Fortunately, the solution to this is to print money and allow the money to flood into the economy. We have been doing this for over 70 years, but the economy does not seem to be doing much better. In fact, it is possible that we are going into another recession, only worse this time there may be a rise in the prices of food, fuel and other essentials of life. This could be the solution that is needed to get the economy back on track.
In the United States, the Federal Reserve is the bank that controls the flow of the money into the economy. I believe it is a necessary institution and there are times when the government should be borrowing money to finance big infrastructure projects.
As the price of oil and other commodities rise, prices of food, fuel and other commodities rise as well. There is a major need to borrow money and allow the money to flood into the economy, to help stimulate it into growth. It is all well and good to borrow money, but how will this money ever be paid back? If prices of commodities rise as they are expected to rise, the prices of goods we buy will also rise, unless there is a major infusion of money into the economy to pay the interest on the debt.
The United States is on the brink of a recession, the Federal Reserve is the culprit. It is a shame that there are times when the United States needs to go into debt, but the economy and currency must be allowed to recover first. Why is it that the United States government continues to allow the flow of money into the economy in such a fashion?
The United States is in need of a major infrastructure project. The problem is that such a project can be very expensive and it will be a long time before there is any revenue to pay the cost back.
I believe that the Federal Reserve needs to be abolished and it needs to be replaced with an institution that will control the nation’s money. This institution would be known as the Monetary Authority. This institution will control the flow of the money into the economy, and only the money within the Monetary Authority can repay the cost of such a project.
However, the monetary authority will have to live within a strict law code and abide by the principle of neutrality. It should not favor one industry over another, nor should it favor banks and financial institutions over any other industry.
I am sure there are many issues that need to be dealt with when a country is going into recession. However, to prevent recessions from happening once there are already numerous, the Federal Reserve needs to be abolished and replaced with an institution that will control the nation’s money.
As of yet, the United States does not need such an institution. Why? Because the US economy is still growing. As more money enters the economy, the less there will be that flows out of the economy. The US economy will have to contract to some extent, if not permanently, so that there will be room for another major financial shock later.
I believe that such an institution will probably be established within the next few years. There is much to be settled within the United States. The United States Congress must clarify and clarify upon the rules that must be followed, and the Federal Reserve Board must be abolished and a new system of monetary policy must be put into place.