A Very Expensive 4 Year Hangover

Now that Senators Obama and McCain have both delivered their acceptance speeches, it's time to have real discussion about change. Both candidates are using the change theme. Both candidates are implying that the change offered by their opponent is the wrong kind of change. I listened to both speeches. And yes, both candidates are promising change, but neither candidate is telling us how they are going to pay for that change. As I listened between the lines, what I heard presented was a shopping list without a budget.

When I go shopping for something, I either know how much money is in my checking account, how much cash is in my pocket or how much credit I have on my charge card, and shop accordingly. By the sound of it, Obama and McCain want to go shopping for change, buy what they want, and present us with the bill. In that respect, both candidates are distinctions without a difference. With thinking like this, the only kind of change we'll be left with, is the change in our pocket. The implicit message from both candidates is: we're going to print the money.

A good friend of mine is a retired banker who told me long ago that politicians have only 3 choices to pay for their spending habits. 1) they can raise taxes 2) they can cut spending or 3) they can print the money. Both parties constantly argue over which taxes to raise or which spending to cut. But they are almost always in agreement on printing the money and expanding the credit supply.

The nationalization of Fannie Mae and Freddie Mac should leave no doubt in your mind that the preferred choice of dealing with monetary problems is to first, last and always: print the money. It's inflationary. In this case, it's hyper-inflationary. It's a backdoor form of taxation that once again, at least for the short term, allows Washington to avoid making the tough choices.

If both candidates can avoid making the tough choices through election day, America will wake up on January 20th with what will turn out to be a very expensive, very painful, four year hangover.