The Detroit auto companies were “loaned” over $17 billion by the government, just before the inauguration of Obama, and they are already asking for billions more. This comes as little surprise with the way government has been handing out unearned money.

A key feature of a free society and economy (Capitalism) is holding businesses responsible for their actions, by allowing them to fail when they are unable to meet the demands of consumers with their own resources. Of course the United States do not, nor have they ever, operated under a Capitalist system. By propping up inefficient companies like Chrysler and GM, we are diverting money into wealth destructive activities. Destruction of wealth leads to deterioration of the quality of living.

People are genuinely concerned about the effects of the bankruptcy of the Detroit auto companies. Many fear mass unemployment (which is happening regardless). However, the foreign car companies cannot meet consumer demand alone, and southeast Michigan has a solid workforce and plenty of capital in the form of factories. Some entrepreneur would likely step in, rebuild the Detroit auto industry, and start selling better and more affordable cars. All this could be accomplished by the government doing NOTHING.

Michael Rozeff believes it’s a possibility:

Hyperinflation is not an immediate prospect for the U.S., but considering the positions of both the government and the Fed, much higher inflation in base money and a rising price level for goods are both definite prospects. It is not too early to review what happens in a hyperinflation, if only to help discern and understand the kinds of actions our government and central bank are taking now. I focus on the German hyperinflation of 1919–23.
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Hyperinflation has a single proximate cause, which is the central bank’s large expansion of the monetary base. What causes such expansion? Large government deficits are one major cause. Fiscal deficits are financed by issuing treasury bonds. When the central bank buys these, it makes the monetary base rise. Government deficits, which have many causes such as wars and social programs, signal a weakness in the political and fiscal systems, which result in taxes not being high enough to cover government spending. The central bank itself causes an independent expansion of the base when it decides to issue credits to such entities as banks, businesses, and other central banks.
This brief summary emphasized the role of fiscal deficits. The U.S. government has a much stronger tax collection system than Weimar Germany. Yet, it is now running the largest official deficit in its history. In 2008, the treasury reports here that outlays exceeded receipts by $816 billion. In the last three months of 2008, the deficits were $485 billion alone. The 2009 deficit will easily exceed $1 trillion. Given the programs being passed and discussed, a deficit nearer $2 trillion is possible. A series of such large deficits is likely according to the Obama administration. The Fed has already indicated its intention to monetize the debt issues of the treasury to an unknown extent.
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We have heard this theory countless times in the past, but the growth of the government debt has yet to abate. We know in the Weimar Germany case that vast increases in government bond issues and inflationary finance disrupted the entire economy. They did not lead to reduced government borrowing but to greater government borrowing. This is the history of the U.S. economy since the year 2000. Increased borrowing at all levels of the economy has led to a large-scale recession, reduced government revenues, and greater government borrowing. This lays the foundation for greater inflation in the future.