The following is an excerpt from an article written by Daniel Amerman for silverbearcafe.com.  He makes some very illuminating observations and does some precise finger pointing at what he see's as the source of our current fiscal troubles.

Reason One: The Political Interests Of Irresponsible Politicians

Nine percent of the US economy currently consists of "free money" from a politician's perspective. That is $1.4 trillion a year that politicians get to disburse on a political district and favored special interest group basis. In other words, $1,000 per month, per American household that can be used to reward friends and that can be withheld from enemies, with personal credit being taken by the benevolent politicians for this never-ending largess.In ordinary circumstances, politicians would be restricted to spending perhaps $200 or $300 per month per household that the government didn't actually have through "normal" deficit spending, with the difference being borrowed in the bond market. Anything above that would require the unpleasantness of raising taxes, with the potential of the politician actually losing their position and privileged lifestyle if he or she wasn't in a "safe district". However, in the current climate, all limitations are gone, the pork is rolling out on a historically unprecedented basis, and the politicians are wielding unprecedented power.

So why do the limitations usually exist on at least some level, and why are they gone now? The last time the US government had directly created money out of thin air on a massive basis to fund deficit spending was the Civil War, and the only other previous time was the Revolutionary War. There is a very good reason such governmental actions are so rare: the only two times it has been done before, the value of the US dollar was rapidly destroyed. So, this spending without limit would not ordinarily make sense. Unless, from the government's perspective, there were other dangers that were considered greater problems, that could be addressed only through destroying the value of the dollar.

Reason Two: To Hide A Depression

I have written numerous articles about various aspects of ReasonsTwo through Four for some years now, and my long term readers and subscribers have been well aware of the building pressures. While the emphasis of this article is on the interrelationships, we will first set the stage by taking a few paragraphs each to briefly review the individual government motivation, with a link to a full length article that covers the problem in more depth.The second government motivation is to hide a depression, and while you wouldn't know it from government press releases or media headlines, there has been a gaping hole in the US economy since 2008, as illustrated below:

During the first round of the financial crisis, the US private economy nearly collapsed, threatening to send the US economy straight into deep depression. We're talking about a $1.3 trillion private sector collapse that was contained only by the government fantastically increasing the money it spent, even while tax revenues were falling. The creation of huge government deficits has been all that has maintained even a facade of semi-normalcy. Remove the mechanism of the government creating money so that it can spend what it doesn't have, and it is straight to official Great Depression-level unemployment in months, as illustrated in the graph below.

Reason Three: A Desperate Attempt To Escape Depression By Waging Currency War

The US government went to war in September of 2010, and for the moment at least - it is winning this currency war. Simply put, the US would have great difficulty emerging from the depression described above so long as the US dollar is "strong", because a strong dollar translates to "expensive" US workers who have difficulty competing for market share even in the US economy, let alone abroad. One solution is that when a nation slashes the value of its currency, its workers become relatively cheaper, and they then cannot only better defend their domestic market share, but can begin to take market share in foreign economies as well. However, when a major nation goes on the offensive, many trading partners will counterattack and try to defend their economies, not by making their own currencies stronger, but by making their own currencies weaker, so that their domestic workers remain relatively inexpensive and will be better able to compete for market share.

To successfully go on the currency offensive and negate attempted counterattacks, Federal Reserve Chairman Bernanke chose a radical tool - he publicly announced that the Fed would be directly creating money on a massive scale equal to 9% of the US economy, with the proceeds going to purchase US government debt. In other words the stimulus and other deficit spending are now being funded simply by creating money out of thin air. Ultimately, the only source of value for a symbolic currency (such as the US dollar) are the policies deployed by the central bank to maintain that value, and when the nation's chief central banker directly threatens to use his power to destroy the symbol rather than preserve it - the threat is extraordinarily effective.

This success can be seen by the US dollar recently reaching its lowest level against the Chinese yuan in 17 years. This means US workers are getting a big leg up when it comes to competing with Chinese workers, both in the US and around the world. The effects are global, with a good example being Brazil, which used to export $15 billion more a year to the US than it imported - but is now importing $6 billion more from the US than it exports. That $21 billion shift from being an exporter to importer translates to jobs leaving Brazil, as well as genuine economic growth for the US, and Brazil is furiously threatening countermeasures, including outright trade war if needed.

There is no free lunch, however. While the US government is insisting to the world-at-large that it is not engaged in currency warfare, in order to maintain the plausible deniability that is essential to diplomatic doublespeak, it is also hiding the heavy cost from its own citizens. The US standard of living since the late 1990s has been based on having a "strong" dollar and huge trade deficits - meaning we haven't actually been able to pay for what we consume for a long time. Therefore, even as jobs and the real economy grow, there is a drop in the overall standard of living, that is not evenly weighted - but is disproportionately born by savers, Boomers and retirees.Much more information on how this works and the specific ways that older citizens will be bearing most of the pain can be found in my article linked below, "Bullets In The Back: How Boomers & Retirees Will Become Stimulus, Bailout & Currency War Casualties". These second and third elements of hiding a depression and waging currency war are tightly interwoven, and could even be called "killing two birds with one stone". The money doesn't exist to keep the US from openly plunging into depression, it simply isn't there for a fiscally responsible government. And covering the economic hole by creating money out of thin air at a rate equal to 9% of the total US economy is so fiscally irresponsible that few nations dare a counterattack of such magnitude. For now, massive monetary creation allows the US to not only cover over the current hidden depression, but also to wage all-out currency war to try to emerge from that depression.

However, to fully understand the agenda of the US government, we have to look at the greatest financial problem of all, and how destroying the value of the dollar is the intended solution.

Reason Four: Dodging National Bankruptcy

Sometimes households reach the unfortunate point where when they add up the credit cards, mortgage payments, and 2nd mortgage payments - they realize that they will never be able to pay their bills. They know they are bankrupt and there is no way of dodging that. But instead of reducing their spending - they may even step up the spending, until all the lines of credit are maxed out, and the bills are all in arrears. Because, once you know bankruptcy is inevitable anyway - why slash your standard of living before you absolutely have to? Partying it up now for another few months won't change the destination, so why not?

Fortunately, relatively few ordinary people think that way. There is ample evidence, however, that a good number of politicians hold that mindset when it comes to budget deficits that appear impossible to repay, at least in the conventional manner.

There is a lie that is being frequently repeated, which is that our children and grandchildren will be slaving away for decades to pay back the money that we've been borrowing to fund this reckless deficit spending. The assumption underlying the lie is that if it weren't for the current spending, the nation would be fine, and therefore increased taxes will be needed to pay back the borrowing.

Except that the nation isn't fine. Like most other major developed nations in the world, the United States has been effectively bankrupt for quite some time, with a day of reckoning that is approaching fast with or without the current outrageous level of deficit spending.

This article contains the ideas and opinions of the author and is not endorsed by Midwest Communications, it's employees, or agents.