Barack Obama has admitted what everyone knows: America is out of money. Over the weekend, an interviewer asked him, “You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?”
“Well, we are out of money now,” Obama said. It’s kind of shocking to hear a politician be so direct. Surely it must have been a slip up. But the man is right. America, along with Britain, is financing a hodge-podge of corporate welfare and classic handouts with deficit spending, otherwise known as borrowing.
If they can’t borrow the money-which is getting more and more expensive as interest rates rise and investors fret about sovereign credit quality-they will print it. What happens when “quantitative easing” is expanded on a greater scale is anyone’s guess. We’ll have more on that tomorrow.
for The Daily Reckoning Australia