10/20/2008 05:12 am ET | Updated May 25, 2011

Spend Your Way Out of Debt America: The government's solution to Wall Street's crisis is--surprise, surprise-- borrowing more money.

I'm no economist (a trait I share with John McCain), so perhaps I need a bit of help in understanding the sudden, near-instant surge of market optimism that's occurred in the latter half of a week that was being characterized as a "bloodbath" just two days ago. Bad debt (as versus the cuddly kind) had gutted the US investment banking industry, killing off Bear Stearns and Lehman Bros, sending Merryl Lynch into a forced marriage, and shaking the rest of the money men down to their pinstriped undies. Stocks plunged, titans teetered, and jobs on Wall Street are being shed at a rate of 10,000 per month.

Shit met Fan.

But by Friday the plunging stocks were surging skyward for a second day, buoyed by the news that the government, via the Federal Reserve, would cover the asses of the banks who just happened to be saddled with all that nasty debt. Debt that they bought, traded, leveraged, repackaged, sold, and profited off of handsomely. Debt that's cost people their homes, jobs, families, and lives.

It is estimated that the bailout, once fully realized, may cost up to a trillion dollars of federal money, though you can expect that number to rise. Once the spigot is turned on, it'll be hard for the Fed to refuse future desperate pleas, and for banks to restrain themselves from running back for more.

This crisis began because the American people, banks, and insurance companies all gorged on debt. They spent more money than they made and now no one can pay their bills, whether credit cards, mortgages, or billions in worthless derivatives. And what's the solution to this? Well, to get everyone back in the black, the government is going to lend them more money. Brilliant.

And where is the federal government getting the money to pay for this monumental bailout?

By issuing more debt, naturally. Because the tax base has been diminished by Bush's wars and tax cuts, and because the largest legacy of the Bush years has been the accumulation of the greatest debt in world history, there is no real green in America's savings account. What's there instead are $9.6 Trillion in IOUs to anyone who has ever bought US debt. This includes treasury bonds, t-bills, notes, savings bonds, etc...basically shares in the United States of America.

And who are those shareholders? Largely the government itself, but in many cases they are institutions, like pension funds or investment banks, and even individuals, like your grandmother. However, an increasing percentage of that debt is owned by foreigners, including huge chunks held by Japan ($592 billion), and China ($502 billion). Don't worry America, spend to your heart's content...your old friend China's got you covered.

Again, perhaps I'm missing something, but what I see here is a country that has borrowed itself into trouble, and is now attempting to borrow their way out of trouble. It's like watching a compulsive gambler going back to the loan sharks for one more chance, only to be found back at the track the next day, letting it ride on a lucky horse in the 8th. Brilliant. I hope they hand out Nobel prizes for this brand of economics.

Amid all this talk of invigorating, stimulating, and funding the American markets, it seems that no one--not Wall Street, not the Fed, not Sens. Obama, or McCain or even Polar Palin--have given America the cold hard truth: sooner or later the spending binge will have to end and the country will need to exercise severe fiscal restraint, paying down the deficit and eventually a chunk of the debt. If things continue this way, America could lose its AAA credit rating, and the world may shift away from a US dollar standard. Financial collapse for America may be highly unlikely, but if the borrowing continues at this rate, nothing is impossible.

For all the talk about the fundamentals of the American worker or $1000 tax rebates for middle class families, the candidates should really square up and talk about weaning America off the debt teat. This means less spending, higher taxes, and a tougher credit environment. You want change? You want straight talk? Look the American people in the face and tell them it's time to pay their bill. Not exactly election winning words, but America cannot keep borrowing forever. It's like digging your way out of a hole. There's only one way to dig, and sooner or later you're going to hit China.

Let's just hope they carry cash.