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Forced Spending the Key to Economic Growth?

I'm getting rather annoyed about I keep hearing on television. Economists keep saying that spending is the key to economic growth and it's how we're going to be pushed out of this recession. I'm not denying that spending is part of the economy, but spending inevitably falls under supply and demand. It naturally gravitates to a balance and I think people are missing that.

The main thing that annoys me is that people like Robert Rice and other economists keep saying if the government cuts taxes, bails out the people, gives refund checks that people would save their money or pay off debt. OH THE TRAGEDY!!!! The horrors of saving your money. Oh no!! Paying off your debt. That's treason!!!

There needs to be a balance between capital and spending. Saving your money, paying off debt, investing all falls under the category of capital. Spending is when you consume. Obviously a business will do better if more people buy, but there needs to be capital too. You can't make loans, without capital. You can't make investments without capital.

Americans have been spending way too much and saving too little. Like, this is an undisputed fact. The fact that saving rates have been growing is good. The fact that people are taking any extra money and paying off their debt is good. If you want a credit crisis to be fixed, let people pay off their debt, let people save money. The more capital a bank has, the more money they can lend.

Obviously the government just wants to spend because that's what the government does best. Government spending will never fix this problem. Money that the government spends comes from someone else. The money leaves the economy and comes to them as tax or the money leaves the economy and comes to them as purchased bonds. There's no net gain, just a distortion between capital and spending.

I'm sure I'll get a typical response like "well what would you do?" It's suddenly implied that something must be done. The market is correcting itself from a distortion and that's what has to happen. No amount of spending will change that. When the correction is finished, the economy will be able to get back to business. Cutting taxes would help, but it's not going to change much. The correction will still need to occur.

The only remedy for this problem... is time.


Anonymous said…
Love your blog title. A good article about the shift toward conservatism can be found at "Obama Takes Over the 100 Acre Wood"

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