The federal spending deficit, inflation and the path the U.S. economy is on are subjects that the media and both political parties often mischaracterize.
The current projection on deficit spending as authorized by Congress will not bankrupt the country. It will, however, seriously debase our currency, which it is already doing. If we take the year 2000 as a base, the cost in dollars for college tuition, gasoline, food, farm land and many investments has increased by nearly 100 percent to 2013. The government would have you believe that inflation has been less than 3 percent per year during that period.
Our Federal Reserve Bank has purchased some $3 trillion face value in U.S. bonds, allowing that amount to circulate without corresponding cost against the purchases. (QE or quantitative easing is the term used to describe these purchases.) This action is effectively printing money and is the way the deficit is being financed.
We are not really going the way of Greece as the daily news threatens, but we should analyze the economic history of Argentina during the last century. In 1940 Argentina was the richest country in Latin America with a peso backed with gold and worth about one third a U.S. dollar. The unions gained control of the nations politics and the country just printed money to cover government expense and pensions with the result that the original peso had less value than 1 cent U.S. by 1975.
If we do not get deficit spending under control, the consequences may well duplicate many of the problems that faced Argentina in the 1900s. That country still has not recovered from the currency debasement and devaluations of their currency.
Ernest J. Lawinger, Dillon