Economics and Crisis - my own summary
For those who are interested, a quick and impartial primer on how the Government tries to "manage" the economy, followed by my own satirical analysis of its effects:
Economics and Crisis
The Federal Government utilizes two methods in its attempts to manage the economy. The first is “fiscal policy,” in which Congress itself (often guided by the Executive branch) raises or lowers taxes and increases or decreases government spending to encourage the kind of economic activities it wants to see at a given time. The second is “monetary policy,” in which America’s central bank, the Federal Reserve (usually called “the Fed”), manipulates interest rates and the money supply in an attempt to achieve what it considers an acceptable balance between unemployment and inflation.
The “stimulus” packages, in which the government pays out billions of dollars to save firms it considers “too big to fail” and to fund the pork projects of influential politicians in the name of “job creation,” or offers tax “rebates” in an effort to buy votes, are examples of fiscal policy. The Fed’s dropping the Federal Funds interest rate (the lowest rate at which banks can lend to each other) to zero and buying up Treasury debt to flood the banking system with liquidity (cash) to encourage lending, along with the Federal Deposit Insurance Corporation (FDIC) making good on its promise to insure all demand deposits by taking over insolvent banks and covering their cash shortcomings with newly printed money, are examples of monetary policy.
To see the success of the new fiscal strategies, just look at how many jobs have been created, how many squandered resources have been put to better uses (by our wise and benevolent government bureaucrats) than private individuals acting on personal incentives could possibly have found for them. Oh, you don’t see any? That’s strange…
Well, at least we have monetary policy to save us! Just look at how successful the zero-to-negative interest rates have been at getting financially strapped businesses already swamped in debt (poorly invested in grossly inflated sectors like housing) to borrow more money, start new projects, and expand their workforces! Wait, that hasn’t worked either? Well damn.
You know whose fault it is? All these people who have spent years over-consuming by spending inflated credit in a politically-driven economic bubble, giving themselves the illusion that the manipulation of funny-money numbers by a deficit-laden government and a monopolistic Central Bank actually represented real wealth, are now doing the responsible thing and saving for their futures. It’s them! Instead of spending like crazy on the fad of the day, they’re putting their money into savings accounts, where it will likely be invested in sustainable long-term projects that will provide goods and services of actual value that will lead to a growth in real wealth and a significant return to the investors over the course of years.
Do you know what this means? Without people blowing all their earnings on the whims of the day, non-viable, obsolete, and over-inflated businesses and product markets (even those that are government subsidized) will shrink or fail entirely! Their resources - land, materials, ideas (patents), labor force - will be released into the world to be acquired and put to more productive uses! How can we let this happen? In the long run, yes, we will all be happier and more successful without the government-driven boom-and-bust cycles that devalue the dollar and drive resources into non-productive sectors. But in the short run, there’s panic to deal with, and businesses need the illusion of real demand to drive them to borrow un-backed paper money that hasn’t been printed yet to produce more products that people don’t need and can’t afford.
So don’t be so responsible! Get your mind out of the real uncertainty of the future and into the fanciful illusions of the present! Run up those credit card bills! Get out there and spend, spend, spend! And eventually, as individuals and as a nation at large, we will spend our way out of debt, and all will be glorious again. Isn’t that how it’s supposed to work?