Money Printing Covering Nearly All U.S. Deficit

In the latest sign that the federal budget is heading for an economic cliff, economist Lawrence Lindsey told cnbc on Wednesday that Federal Reserve printing presses are papering over almost the entire budget hole.

On September 13, the Federal Reserve announced that it would create $40 billion per month out of thin air to buy products from the big banks until the economy improved. Combined with the Federal Reserve’s other money printing program of $45 billion per month, the Fed is virtually “buying the entire deficit,” says Lindsay.

Never before has America relied upon artificially created money to cover so much of its spending. According to Lindsay, the Federal Reserve has taken the drastic action to take the pressure off a gridlocked Congress in an election year. “The Fed, maybe because it can’t do otherwise, has told the Congress: ‘We’re going to buy your bonds no matter what,’” he said. If the president and Congress can’t borrow and spend more money to inject into the economy (due to election constraints), then the Fed will.

But now the Federal Reserve is taking America into an unmapped economic minefield.

“I have no problem doing extraordinary things in extraordinary times,” said the former White House economic adviser, but doing something so out of the ordinary is really risking things.

According to Lindsay, if money printing “becomes the new ordinary,” the Fed won’t have much maneuvering room if another crisis hits.

And another crisis may be on the way shortly. On September 27, the Commerce Department reported that new orders for durable goods (long-lasting U.S. manufactured goods) had dropped by the most since the Great Recession of 2009. New orders fell in August by a whopping 13.2 percent. It was a huge surprise to the downside and could indicate the economy is headed for another recession. Economists polled before the announcement had expected durable goods orders to contract by only 5 percent.

In related news, the Commerce Department also announced on September 27 that the nation’s gdp growth was slowing rapidly. During the second quarter of 2012, it grew at an annualized rate of 1.3 percent—down from 2 percent the previous quarter. gdp growth is now so slow that it is probably zero or negative after accounting for real inflation.

These numbers, which are important numbers for the economy, are “depressingly weak,” especially considering all the money printing the government has done, laments economic analyst Rick Santelli.

Another recession will probably hit soon. But there is a way that you can prosper—even in the midst of a recession. Read: “How You Can Prosper in a Recession!”