The Federal Reserve Enables Big Government.

Discussion in 'Economics' started by Sammysouth, May 10, 2011.

  1. End the Federal Reserve and you will end out of control government spending.

    Currently the U.S. government spends $1.5 trillion more than in collects in taxes. It must borrow this money. In a free market this additional amount of borrowing would drive interest rates higher. Those rates would have to be paid on new debt and on existing debt that is rolled over as it matures.

    The interest payments would climb higher and higher until the market would naturally max out the government’s ability to borrow. That magical point would be the instant that the new borrowing would cause interest rates to rise high enough that the additional interest payment on new and rolled over debt would exceed the new amount being borrowed.

    Using the $1.5 trillion dollar deficit and a national debt of $15 trillion as examples, and a simplified example where all the government debt was due and had to be rolled over this year, the government would cease to expand when by interest rates rise by 10%. At that point the $15 trillion in debt would cost $1.5 trillion more than previously to finance, thus using up the $1.5 in new borrowing.

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