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Time to Unplug the Federal Reserve and Let the Economy Recover on its Own

By: Steve Johnson

6/28/2010 - 44 Comments

The G-20 meeting resulted in a rare occasion with almost all of the national leaders suggesting the same strategy for the global economy.

The strategy is to STOP government borrowing and spending and let the people rebuild the economy without government intervention.

Only one leader had a different strategy, President Obama, which was to threaten the rest of the leaders into continuing to print and spend money until the global economy is clearly out of the recession.

The lack of influence of Obama’s economic policies with world leaders seem to mirror his sinking influence at home as the polls continue to show his approval rate dropping.

California on 'Verge of System Failure'

From Obama's side of the fence, California is about to suffer a complete economic meltdown. Obama has a Greece debt problem times ten—as California is on the verge of system failure.

According to an article at NewMaxx,

“California’s fiscal hole reportedly is now so large that the state would have to free 168,000 prison inmates and permanently close 240 university and community college campuses to balance its budget in the fiscal year that begins July 1.”

“We are on the verge of system failure,” Jean Ross, executive director of the California Budget Project, told the Globe and Mail. “We have to get some federal money,” Ross says. “It would be bad for the U.S. and, arguably, bad for the world to do the shock-therapy approach.”

Budget analysts say Governor Arnold Schwarzenegger has no choice but to ask Washington for bailout funds, and that Washington has no choice but to agree because not bailing out the Golden State could put the entire U.S. economy at risk. It seems that California — which at one time had the third-largest economy in the world — is like the biggest U.S. banks: Too big to fail.”

Obama needs to print a lot of money to bailout California and keep the US economy from collapsing, but he cannot do that unless he can convince world leaders to follow suit and continue printing money so that their nations will continue accepting the value of the dollar as is. 

Without foreign nations printing money as fast as the US, the dollar will sink and the US economy will be force to face massive inflation on top of its troubles.   The inflation (reflected in higher prices) will then force the US to stop printing and borrowing money as interest rates rise.

There will be a lot of difficult decisions in the next six months and the direction of the economy is at stake. Taken together, state budgets are $112 billion over.  If Obama gives federal money to California, every state will want be bailed out.  Who will get the money and how will it be fair?

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