The convoluted economic charlatans of Washington are trying to tell the American people there needs to be more spending by consumers in order to avoid a recession. And that spending is to come from money that will be distributed by the government that it will print. This is so idiotic its a wonder there isn’t a mass demonstration on the White House and Capital lawn. Telling someone they need to spend more to keep the economy strong while imposing taxes that restrict spending by the consumer/taxpayers and then printing money to encourage the spending is like reading ‘Alice in Wonderland’. It costs money to distribute this “free” money so why wouldn’t the tax rates be lowered to avoid this cost? Why? Because the more permanent stature of a lowered tax rate would be revenue lost and besides where would the gratitude of the voters be?
A fiscally responsible stance would not call for deficit government spending for any purpose but call for a reduction of government spending across the board. It would reduce government spending to a level that would reduce the deficit and eventually the national debt. This would give credibility of the government’s promise to pay but such a trend is impossible with unlimited government prerogatives. Because a government structured with an ability to tax cannot insure currency integrity, only a gold standard will impose the kind of fiscal soundness that will prevent the eventual runaway inflation that proceeds from deficit spending. Make no mistake, deficit spending will always be a consequence of a government that is unrestricted.
If you consider the plight of an individual that is given a credit card and uses up his credit limit ( which is based on his ability to repay ) you have a micro view of the government on a spending binge. After reaching the maximum credit level the individual cannot spend more. He must retract his spending habits and he must live within the income he has. Or he must declare bankruptcy. The government doesn’t declare bankruptcy but it does go bankrupt. When it prints money that loses its value via inflation it is essentially bankrupt. No matter how much it prints , it cannot buy anything with worthless money. No one will accept worthless money and the economy reverts to barter or uses a nation’s currency that has value. The Confederacy proved this conclusively.
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The notion of stimulating an economy with a distribution of money from the printing presses shows how naive the politicians are when it comes to how an economy works. Since politicians only recognize business as sources of revenue they don’t grasp there are principles the business owners operate under that do not apply to how the government operates. There is no bottom line in politics to drive cost cutting and revenue generation. There is only the funding of payola to convince voters to support those who promise to give them benefits. If it was possible to stimulate an economy by simply dumping money for citizens to spend why would it only be done when economic distress was in the air? Would it not stimulate the economy at every level of activity to print and give without limit? NO , of course not. The more money that is printed and given, the more the national debt increases, the less the value of the money in circulation, and the less the buying power of the citizenry. With less buying power each and every citizen becomes poorer, the government becomes poorer and in essence we have the ultimate lose-lose situation.
By contrast a win-win situation is possible but it consists of the opposite approach. The government limited in its ability to distribute fiat money is forbidden to control the currency. Banks issue the currency based on real tangible precious commodities such as gold. Those earning the best reputation will prosper and their currency will gain the largest market share. The best banks will insure their survival and business growth by issuing a quality currency and making responsible loans to those who have earned good credit standings and a reputation of paying off their debts. Money under these circumstances remains stable and valuable. There are minor economic adjustment periods and growth and prosperity continue. This is what is possible but which is dismissed by those who think the power of government and regulation trumps the phenomena of human judgement, trade and liberty. This pernicious dogma is reinforced by academia, media and those who wish to live by seeking power, the politicians.
You hear the almost unanimous purr of approval of a stimulus with an almost instant acceptance that a payment from the government will pass harmlessly from the printing press to the hands of the needy to the hands of the merchants who will prosper and provide more jobs because the demand for their merchandise has increased. But where you may ask did that money come from? Was there a stash of cash hidden by the government that was only waiting to be doled out? There was not. The government has nothing to give that is not confiscated, borrowed or printed. If a counterfeiter offered a stimulus plan the government would cry foul but in truth a currency without credibility can come from either the crook’s basement or the government’s printing press. It only takes longer for a government to be found out. When the money is worthless and you cannot buy anything you have the equivalent of a counterfeiter’s booty.
This then is the end result of a stimulus without sound currency to back it. It will not be seen instantly but it would be if the stimulus was large enough. And with progressive deficit spending the moment approaches each and every day the policy is not challenged and reversed. The politician hopes it will last until at least after his election. The academic hopes it will last his lifetime. The media until the next deadline. There is no consideration for the next generation or the future of the country. It is like the corporate managers who manage by quarterly reports and ignore the long term success of the organization. Inflation tolerance is based on short term thinking. A person who goes on a spending spree until he is broke is only an individual example of a group under the auspices of a political body doing the same thing with the ultimate same result. In the campaign of today there is an increasingly popular phrase being bantered about saying ,”Washington is broken.” It comes very close to the real truth that is the dreaded future. That statement is, “Washington is broke”.
The statement by JFK asked, “.. what can you do for your country?” When this question is put to today’s politician it should include a specific request. “What will you do to prevent your country from going bankrupt? “ An oath of , I will not spend more than revenues dictate” would be a good place to start. This would do more to stimulate the economy than any flurry of printed bogus bills.
The opinions expressed in this commentary are solely those of the author and are not not necessarily either shared or endorsed by iPatriot.com.