Nothing is free. Nothing. There’s a cost to someone – even a gift costs the giver time and money. It may sound lame, but even God couldn’t do free. He had to come to earth and sacrifice himself.

What then do we make of all the talk – at least in my state (NY) – of free education? Or anything free the government provides?

It isn’t free!

The correct term is either “tax payer funded” or “paid by someone else.”

While the government genuinely creates money out of thin air, it can only do so to a certain extent without causing hyper inflation. (remember Weimar Germany?) It must largely rely on tax revenue – the bit we pay directly (income taxes, sales and use, tolls), indirectly (corporate taxes, tariffs), and hidden (inflation).

Any talk of giving stuff out for “free” needs an immediate grounding to reality. Things cost money and debt is not how a government should pay for it. Period. If a person wants the government to provide a service or benefit it needs a source of funding.

The consequence of giving out “free” stuff a government can’t afford is deficit spending. A government does this by taking tomorrow’s prosperity and using it today – it borrows cash by issuing a bond (debt) at interest. The effect is to create a lingering financial burden that eventually overwhelms the system.

This puts the Federal Reserve in a bind: raising rates is needed to check the impact of inflation, but we can’t afford our debt with higher rates. Normally, people and businesses in this situation just default or go bankrupt. However, the US can’t afford to tarnish its good credit rating with a default. Not to mention the damage to the global monetary system that relies on the dollar and the pressure China and Russia are putting on it to end the Global Dollar Standard. That means the Fed will choose what it considers the lesser of two evils: high inflation to inflate away our debt because it is the sneakiest “tax.”

First we’ll see deflation, a consequence of student loan defaults, bankruptcies, and foreclosures, destroying outstanding debt (and the corresponding currency). This reduction in money supply causes spiraling deflation. The government will over-react with big spending and low interest rates – just like the Great Recession. Except we’ve already printed tons of cash. are running huge deficits, and have chalked up a massive national debt going into this next cycle.

In the end, all that free stuff we pile on year after year destroys the nation, just like excessive spending kills a business or runs a person into bankruptcy. Eventually the US will default – fact not opinion – it’s just a matter of how long and painful it is before we do. (Weimar Germany vs modern Japan) Only then can we clear away the debt and start over.