A simple graph

gdp_allfourJust a simple graph.

GDP falling.  Consumption ever so slightly rising.  Investment plummeting.  Still.  Government the only thing that has continually grown.  No surprise there.

“Ah, ha”, says the Keynesian.  Were it not for the government, surely we’d have fallen deeper into depression.

Such simplicity might win some nobel prizes and spots on the NY Times editorial staff, but this represent false growth.  It doesn’t represent real increases in productive capacity, real increases in wealth, nor real increases in standards of living.

For as Mises told us so presciently, a dollar spend by government necessarily crowds out a dollar of private spending.  Worse, if it is borrowed money, it simply drives us deeper into debt.

Government spending as such, so highly touted by dear leader, simply transfers wealth from one group and directs towards other, more politically favored groups.  Or in some cases, such as cash for clunkers, it directs it towards government owned industries.

I almost forgot.  Who finances these new cars?  That’s right, the banks, also owned by the government.

If it borrows to spend, as it has been doing with reckless abandon, it simply inflates the money and destroys people’s wealth and savings.  It directs funds to pay for goods not desired by the public at the current prices, to be purchased by them anyways, through force.  It allows businesses to keep prices artificially high, both retarding recovery and a de facto tax on consumers.

It also forestalls, perhaps prohibits, the necessary liquidation so needed for real recovery.

Make no mistake about it.  An economic growth you hear about, on the talking-head shows or the editorial pages, any recovery we’re supposedly beginning, is artificial.  It is destructive and when the narcotic of government loot stops flowing, the pain will be even more pronounced and prolonged.

You cannot spend your way to prosperity.  Although I have a bottle of cash that might help.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: