Is the continued debasement of the currency. I'm not throwing bombs or predicting utter disaster. I don't think we're headed for post-WWI Germany. And I'm not hoarding gold coins, guns and ammo.
But the debt level -- and the politicians and all those connected to the federal government gravy train refusal to get serious about it -- make monetizing the debt at least a significant possibility.
Even a probability.
If you live in America, that impacts every aspect of your life. Everything from money saved for retirement to running down to the corner store to buy groceries.
And, as Lewis Lehrman wrote in Tuesday's Wall Street Journal, unless the politicians are willing to PREVENT monetizing of the debt, all the plans we're hearing about won't succeed.
In short, no reform of the Federal Reserve system equals no success in spending restraint.
Here's his recipe for what should happen:
First, in order to limit Fed discretion, the dollar must be made convertible to a weight unit of gold by congressional statute—at a price that preserves the level of nominal wages in order to avoid the threat of deflation. Second, the government must at the same time be prohibited from financing its deficit at the Fed or in the banks—both at home or abroad. Third, only in the free market for true savings—undisguised by inflationary new Federal Reserve money and banking system credit—will interest rates signal to voters the consequences of growing federal government deficits.
Unrestricted convertibility of the dollar to gold at the statutory price restricts Federal Reserve creation of excess dollars and the inflation caused by Fed financing of the deficit. This is so because excess dollars in the financial markets, at home or abroad, would lead to redemption of the undesired dollars into gold at the statutory parity price, thus requiring the Fed to reduce the expansion of credit in order to preserve the lawful convertibility parity of the dollar-gold relationship, thereby reducing the threat of inflation.
This monetary reform would provide an indispensable restraint, not only on the Federal Reserve, but also on the global banking system—based as the system now is on the dollar standard and foreign official dollar reserves. Establishing dollar convertibility to a weight unit of gold, and ending the dollar's reserve currency role, constitute the dual institutional mechanisms by which sustained, systemic inflation is ruled out of the integrated world trading system. It would also prevent access to unlimited Fed credit by which to finance ever-growing government.
The good news is that the G-word is being uttered more often these days. And without everyone thinking only kooks or conspiracy theorists say such things.
But the bad news is that both political parties, at the top, want to have the power to manipulate the currency. And we have a very long way to go to counter that.