Let’s review where the Unites States stood in February 2020.

First, let’s look at the good news.

• The unemployment rate was historically low.
• The stock market was booming.  (This also falls into bad news.)
• The U.S. had officially been out of recession since 2009.
• There was optimism.  (Maybe this also falls into bad news.)

Now let’s look at the bad news from February 2020.

• The U.S. national debt was over $23 trillion
• Medicare and Social Security were set to run out of money in the not-too-distant future.
• When you consider that the trust funds held nothing but a bunch of IOUs, the so-called entitlement programs were already out of money.
• The total unfunded liabilities were estimated from the tens of trillions of dollars to over $200 trillion dollars.
• The stock market was in a massive bubble from over a decade of easy money and low interest rates courtesy of the Fed.
• Corporate debt was continuing to rise at seemingly unsustainable levels.
• Individuals were accumulating more debt.
• A majority of Americans had less than $1,000 in savings.
• The federal government was running an annual deficit near $1 trillion.
• The repo market had just blown up in September 2019, compelling the Fed to intervene.

The Coronavirus Economy

Then the coronavirus came to America.  The media and government officials managed to instill great fear into Americans (along with the rest of the world).  Americans allowed governors and mayors throughout the country to act like dictators and close down many businesses that were deemed non-essential.

Since that time, the federal government has spent multiple trillions of dollars.  That, coupled with decreased tax collections, means we could see a deficit hitting somewhere close to $4 trillion this fiscal year. The government will spend more than twice what it actually collects in taxes.

Meanwhile, the Fed has gone on a digital money printing spree.  It increased its balance sheet over $2 trillion in about six weeks.  Its $6.5 trillion (and growing) balance sheet really pales in comparison to the $900 billion it was in 2008.

We were already in a massive stock market bubble.  We were already in a massive debt bubble.  We were already staring at hard times ahead.  We were already looking at defaults coming in entitlement programs.  We were already looking at broken promises.  We were already looking at defaults through inflation.  We were already looking at adjustments to our living standards.

This was all the case in February 2020.  Now, state and local governments shut down businesses for a couple of months. Some may extend it longer. And the federal government is spending money like there is no end in sight.  The politicians in DC decided to pay people not to work. Many of them are making more money not working than they previously did.  How could they not see this as a problem?

Even if the economy does turn back on like a light switch – which it won’t – there has already been tremendous damage done over the last two months.  The government spending and the monetary inflation are serious issues that Americans obviously have little grasp of.  If they did, they would be outraged by it.  But most people don’t seem to care. They just think it’s great that they are getting “free” money in the form of a stimulus check in the mail.

This is a complete disaster.  There are going to be severe consequences.

I try not to underestimate the power of the free market.  The problem is that we have to find some semblance of a free market at this point.

Germany and Japan were both devastated from World War 2.  They both adopted relatively free market policies after the war. It is actually quite amazing how quickly these two countries were able to grow wealth.  They were starting from a point of devastation.

The U.S. is obviously in a much better place than Germany and Japan were in.  Our infrastructure hasn’t been destroyed by bombs.  But if we want to have any hope in prospering, we need a drastic reduction in the size and scope of government at all levels, but particularly the federal level.

Our living standards are going to suffer in the near future no matter what.  The debt isn’t just going to hit future generations. It is hitting us hard now. It is extracting resources from the productive economy.

If we want great prosperity, Americans need to withdraw their consent from the politicians who are so eager to spend money like there is an endless supply.  But that money is supposed to represent resources, and there is a limited supply of resources.