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Wednesday, January 7, 2009
A hard transition
Today's post was more inspired by the linked article rather than in response to it. FINALLY, the economy is on every tongue in America. While it should have never left our public conversation at these levels, I will take what I can get. There is a huge part of the current economic problem that no one is mentioning. It is the element of the economic problem that will drag this problem out for quite some time and the reason that no stimulus package will truly solve the problem. There are a few necessary elements for any capitalist economy to work and prosper. One is that the economy must be savings based and the other is that it must be free. As the federal reserve and the government began to strangle the natural, free economy with regulation and the switch to fiat money we slowly slipped from a savings based economy to a debt based economy. It doesn't take Milton Freidman to see that there is a problem with this. A debt based economy can only grow as more debt is accrued. The debt pond gets fished out really quickly. The same principle can be appliet to our fiat monet system. the currency can only be inflated so much before it collapses. No matter how many 600 and 500 dollar checks you send out to the American people, the money will usually go toward payment of debt. And before Stan even says so, the government buying the nation's debt would be one of the worst things to do about it. This would not only put the final nail in the socialism coffin but further ravage the economy as well. This issue is why we are seeing the problem in the lending institutions first. The average American is now so far in debt that they cant accrue anymore. This stops any debt based economy in its tracks. We will have a rough transition back to a savings based economy, but it is on the way. Americans are becoming afraid and starting to save again. Hang in there and deregulate and this thing will pass. Okay, I will stop here before this turns into a complete rant. BTW guys sorry I havent been around a lot. Been workin on a book project. I will keep you updated over the next 20 years until its done. Thanks for reading.
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Funny you mentioned me, as if someone else reads these things. This is not an insult, but an observation. And as for the whole of America being in debt, nationally, yes, but person to person, kinda debatable. The problem is not extended spending, but an rising rate of unemployment. Some people don't have money to save, they just want a job to make money so they can start saving it. The stimulus package isn't just to "stimulate" the economy, but to help those who need money, period.
ReplyDeleteFace it, some people, hard-working citizens by the millions who have done nothing wrong are now unemployed because their boss or their company as a whole dropped the ball. I understand what you mean by the government not being able to give money it doesn't have, but once the combat operations we can't fund are slowed to a halt and a myriad of other jobs are created, we should be good. Think of the package as a bandage on a large wound. It's better than nothing.