Temperance, anyone? Not on the government's watch!

It seems odd to me that fiscal and monetary policy are designed to encourage spending at every turn. There is something like $50 trillion in credit debt outstanding right now in America. Are we to believe that the way to prosperity for the masses is to spend even more money from an empty Treasury vault?

I would love to see a true accounting of the Federal Reserve System actions of the past and all future actions as well. Not just the already GAO-approved audit of the checking receipts - I would like to know which foreign central banks and other entities are the beneficiaries of the largess; details of the Open Market Committee operations which serve to inject 'liquidity' into the fractional reserve system by purchasing bonds, mortgages, commercial paper, etc., at the whim of a few very powerful people. All these actions are geared toward creating more credit (that is, more debt on top of the $50 trillion outstanding debt already on the economy).

I would also like to see the over 260 million ounces of gold that are supposedly on hand according to the FED balance sheet ($11 billion gold stock at a severely under-market valuation of $42.20/oz). If our dollars were once again backed by gold (there are over $2 trillion in circulation), a sound money value of dollars to gold would be somewhere around $7000/oz or $8000/oz. The market has it now at nearly $1200/oz. A thought question: Why does our government insist on valuing gold at $42.20/oz when the whole world is purchasing it at a higher price measured in dollars?

Along these lines, I would like to know what Mr. Bernanke's exit plan is to get out of the trap of 0.00% to 0.25 % federal funds rates for the foreseeable future. This low rate influences market interest rates and forces them to artificially lower levels. This stimulates yet more debt! The only thing keeping housing prices up and consumers making purchases right now is the relentless stream of this nearly free credit (at such low rates, the real rate of interest is negative) and myriad giveaways such as the recently extended $8000 (and $6500) tax credits for home buyers, cash for clunkers, energy efficient window credits, appliance stimulus and the like.

If interest rates rise and giveaways cease, the flow of consumerism will stop. All the purchases of homes in the last quarter that drove the GDP up a few percent were based on the housing tax credit; when that credit expires (it has been extended into early next year) , the consumerism goes away and we are right back where the government does not want us (with inventories on hand that cannot be sold for the inflated prices which have been attained).

A clear example of this was the development of a major spike in car buying as a result of the cash for clunkers giveaway. See for yourself:





Does it not seem odd that there was a precipitous spike in purchasing which bumped vehicle sales up corresponding to the timing of the cash for clunkers stimulus? The "accomplishment" was short-lived; the boon for dealers and manufacturers was a bust for a working person who wanted to buy a functioning $3000 to $5000 automobile. Those went to the scrapyard with an engine block full of molten glass. The previous owners "bought" new vehicles on credit with $4500 in pseudo-free money and when the program stopped, the purchases went right back down to where they were previously. Instead of automatically assuming that demand must be stimulated, why is it so hard to contemplate that demand was artificially high to begin with and that the new (albeit lower) level was more indicative of the true nature of the market?

It seems that the government thinks of the economy as a binge-drinker in need of protection from a nasty hangover. So, instead of allowing some temperance, the magnanimous government tips a glass permanently to the lips of the drunk in the form of nearly-free credit and various giveaway schemes. Continually drinking that glass will bring about a painful end to the overindulged economy.