A Dummies’ Primer On The Debt Deal, Credit Downgrade, Market Selloff, And Gold

Wakey, Wakey, America. Judge Napolitano gave a very easy to understand explanation today of the trick the ‘big government‘ party just played on the American public with the debt deal and why events such as the credit downgrade and market fluctuations are occurring. This information is intended for those newly awakened Americans who are just starting to realize that our debt is unsustainable and need to understand why. Regular Monster readers can feel free to send this viral, and please make sure to let them know that our debt is our greatest national security threat.

I have transcribed the entire 4:36 minutes for those that want to send the hard copy viral instead of just the video. Yes, it’s that good. (H/T Patriots Network.)

Judge Napolitano, FreedomWatch, 8.9.2011, Explaining The Mayhem:

Does the government work for us or do we work for the government? When the government blunders and the stock market takes a nose dive and the government’s credit rating goes down, can the problem possibly be cured with more government?
Tonight, the benefits of supply and demand and gold.
The market today enjoyed a monumental comeback from yesterday. This was fueled, no doubt, from the laws of supply and demand. The price of stock in strong, healthy corporations went down, thus the demand for their stock went up. Thus knowledgeable buyers bought the stock and the market rose. That’s the way things are supposed to work. Unfortunately, lurking around the corner is the great string puller, the Federal Reserve. We all know the background for this. For the past two months, the president and congress debated loud and long over the debt ceiling. The big government party in congress, that would be all of the democrats and most of the republicans agreed to permit the president to borrow $2.4 trillion more dollars in order to spend as he planned, but they just couldn’t agree on how to sell it. The republican wing of the big government party wanted to reduced proposed increases in spending; those are not spending cuts, they are a reduction in the amount of planned spending increases. The democratic wing of the big government party wanted to increase taxes; not taxes on everyone, but just taxes on corporations and on the rich. They defined rich as any couple earning more than $250,000 a year.
As we know, the two wings could only agree on borrowing and letting the president spend, so to resolve their dilemma of reduced increases in spending versus higher taxes, they created a so-called ‘Super Congress’ . A committee of twelve members from both houses; all from the ‘big government’ party to decide what congress and the president have been unable to decide, and if the ‘Super Congress’ cannot decide, then certain reductions in the rate of increased spending will automatically kick in unless, unless a majority of congress is opposed. And if the president wants to keep borrowing and spending, he can do so unless, unless two/thirds of congress is opposed. Well, you get the picture. This emperor has no clothes.
The congress was just interested in getting home for August. It simply didn’t care about adding $2.4 trillion to the government’s debt and it probably didn’t even understand the consequences of doing so, but smart investors did. They began to take their money out of the stock market and put it into gold. Now why did they do that? Because they know that the government plays a trick on all of us. It’s called taxation by inflation. When the government borrows, especially when it does so from the Federal Reserve, that causes prices to go up as the value of the dollar goes down. This is a cruel thing for the government to do because it hurts the most those that can afford it the least; right where they need to spend, on food, on clothing, and on fuel. The government likes inflation even though it is a form of fraud and a form of default. Think about it, if you lend a dollar to the government, but it pays you back with another dollar that can only buy $.50 cents worth of goods at the time it pays you, the government has defaulted or defrauded you on the second $.50 cents. Investors know this. So when the debt deal no deal that let’s the president increase his borrowing to $6.7 trillion in the four years of his presidency became law, smart investors fled to gold, which increases in value even when the government plays its tricks.
Enter the Federal Reserve. It doesn’t like gold because it can’t control the price of it, so it sends signals as it did today; it might give the banks more money to lend and it might give the feds more money to spend if investors would just get out of gold and back into the market. And the Fed didn’t do anything new; it just promised to keep interest rates artificially low. All this happened. A market nosedive that caused the loss of 15% of value off the high this year. A downgrade in the government’s credit rating for the first time in history. A central bank artificially creating easy credit because the congress and the president cannot address the issue of debt in a responsible way. They just want more of it. They cannot make hard decisions. They cannot do what we elected them to do. They have effectively decided not to decide.
Shall we keep a government in power that does this to us? Or shall we replace it?
The answer is obvious for our freedom and our prosperity, November 2012 cannot come soon enough.