.

.
Formally Bug Drivel; now Freedom Lover USA ~ 2003 - 2016 : All Rights Reserved ~

Tuesday, February 3, 2009

What are they really trying to stimulate?

Ultimately here is the problem with "government stimulus." The government does not have wealth, and does not create wealth. The government has money, and can print money but money is NOT wealth.

People create wealth in the things that they produce. It is that wealth that we spend our money on. And that is ultimately what gives our money value. If you have no goods or services to buy then all the money in the world has no value.

Those two ideas being said, the government cannot infuse the economy with wealth, only money, and by printing more money the government devalues the currency. Then you have an inflation problem where you have too much money and too few products so the buying power of your dollar diminishes.

So here at last is how the whole house of cards collapses. In order for our government to give out money in the form of a stimulus in the amount of $825,000,000,000, they must do one of 3 things, tax it, borrow it, or print it. Taxing $825,000,000,000 out of the economy WILL crush this economy; it simply does not have that much wealth to give.

Given that our debt is at the bottom of this economic meltdown and that we already owe over a trillion dollars, who would loan us money. And does it make sense to borrow it given that being “over leveraged” is what got us here.

So that leads to the last solution, print more money. Now if we do that then we will create an inflationary cycle that has not been seen since the 70’s.

Written by Arc

2 comments:

LogicalDave said...

The 1980s and 1990s saw massive growth of debt (government, corporate, and personal) and massive concentration of wealth. Inflation reduces the value of saved wealth and of accumulated debt so it is likely to be the direction we're headed...for better or worse.

Until we fix corporate and public governance, we are doomed to repeat these cycles.

Arc said...

LD,
It all comes back to borrowing as the key problem, and I suppose you've just boiled down what I said in a page into to paragraphs. We cannot fix this by spending more money we don’t have.
Thanks for stoppin by.

May we each take the moment necessary out of this day and any day we feel the need to remember those who have gone before us in defense of our freedoms. Without them... we would not be "here"... we would be in chains. ~Bug~