The credit market has evaporated

America spends more than it earns or saves, and thus faces a situation in which
the credit system has been overextended. This starts with individuals and extends
to the largest financial institutions. As regulators scratch their heads trying
to figure a way out of this mess, they keep confronting the same problem. Sure,
they can save the banks if they restrict lending and tighten the rules, but that
leaves unsolved the problem of how individuals and businesses will be able
to finance current spending as credit markets evaporate.

No one seems to want to suggest the obvious. The last thing depositors should do
is remove their money from banks. It might sound somewhat counterintuitive,
but keeping money in the banks, and in fact increasing the amount we save,
will get us out of this crisis sooner than any Washington politician with their
magic wand. Americans feel the truth in their guts. While the government wants
us to believe that a tax stimulus check will increase spending enough to save
the economy, it might just amount to pouring fuel on the fire by discouraging
individual savings and austerity measures.

The fact of the matter is that we cannot spend our way out of this crisis. The Federal Reserve
has done all it can to make money cheap by lowering the reserve rate. That money
has already cycled through the economy, and those individuals and institutions that
are on healthy footing have already renegotiated their credit terms. The problem
is that a period of restricted spending is the only viable remedy for both
inflation and credit insolvency.

Armstrong Williams is on Sirius/XM Power 169, 7-8 p.m. and 4-5 a.m., Monday through Friday. Become a fan on Facebook at www.facebook.com/arightside, and follow him on Twitter at www.twitter.com/arightside.