Government broke the economy.

Now it’s promising to fix it.

The “fix” will almost certainly be worse than the problem it created to begin with.

Most people remain blissfully ignorant of the economic wounds inflicted on the U.S. economy by the government-imposed economic shutdowns in response to the coronavirus. But every once in a while, the curtain blows back and we catch a glimpse of the damage. For example, a report released last week by global advisory firm Stout, Risius and Ross estimated that Americans currently owe more than $21.5 billion in past-due rent.

A federally imposed eviction ban that shielded about one-third of renters living in buildings with federally backed mortgages recently lapsed and the $600 weekly federal unemployment benefit expired last Friday. One analyst told Reuters that without more government help, we could see “a staggering surge in homelessness, unlike anything we have seen.”

Moody’s Analytics Chief Economist Mark Zandi called the unprecedented amount of back rent “catastrophic” and told Reuters “very few people will be able to pay this back.” He said the resulting debt spiral could haunt displaced tenants “for a lifetime.”

In July alone, 21 percent of renters paid no rent, according to the research firm Apartment List.

Most pundits think the federal government should bail out everybody with more stimulus checks and extended unemployment. But that solution could ultimately be worse than the problem. At best, it merely kicks the can down the road.

We can debate the wisdom of forcing businesses to close to slow the spread of COVID-19, but we can’t debate the economic impact of these government shutdowns. And yet far too many people seem to think everything will be fine as long as the feds keep the stimulus spigot running.

The ugly truth is the U.S. government doesn’t have any money.

Since the economy crashed thanks to the governments’ shutdowns in response to the coronavirus, the federal government has borrowed trillions of dollars for its stimulus program. The June budget deficit was bigger than all but five of the yearly deficits in history. Meanwhile, the Fed is monetizing a big chunk of that debt through its government bond purchase program. In effect, it is buying up U.S. debt and paying for it with money printed out of thin air. Money supply growth hit a new all-time high for the third month in a row in June. The only time we’ve seen money supply growth anywhere near this level was during the inflationary years of the 1970s.

Nevertheless, state and local leaders think they can shut down their economies with impunity because the federal government will bail them out. And they probably will, as long as the money printing presses over at the Federal Reserve keep humming. As I have written before, the Fed is the engine that drives the most powerful government in this history of the world.

But like all government solutions, this one is creating an even bigger problem. The money printing is destroying the dollar. We’re already seeing evidence of it with gold over $2,000 an ounce for the first time ever. As more dollars go into circulation, each individual dollar is worth less, all other things equal. That’s why the price of gold is going up in dollar terms. We have more dollars chasing roughly the same amount of gold. That means it takes more dollars to buy an ounce.

In simple terms, the government “fix” is destroying your money.

Government at the state local level is basically dumping dirt in your living room. The federal government is cleaning it up by tossing water on it and smearing it around with a dirty mop. So, who’s going to fix the meds the feds are making?

Mike Maharrey

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