Why doesn’t the government just hire everybody at a fair wage, thus solving unemployment? (It appears to be trying, right?) That’s what the politicians are selling, though they fancy it up. Consider: When a politician says government should ‘help’ he means, it should spend. That’s all a government can do, right? Well, other than imprison you, which may not help much though you don’t have to worry about meals. And jail space is already at a premium…
Where does government get the money it spends? Why from you, of course; there’s no other source. If it takes too much, you stop eating. Since that terminates your usefulness, the government tries to stay short of that. Instead, it borrows from your future money and your kids’ future money. It can spend the borrowings now and you get to repay them later…plus interest. By for instance, receiving less Social Security and less health care from government after you retire. The difference will help repay some of that earlier borrowing.
Another gambit is for the Fed to create new funny money out of electrons and funnel it to the U.S. Treasury and banks. That’s free, isn’t it? Why not just print more money and pay all our debts? Because that destroys the currency. Money isn’t wealth; money is what you use to buy wealth. If you’ve $100 worth of wealth, you can sell it for $100. If your buyer has $200 you don’t care…unless he really needs your wealth and has to offer you the $200 for it. You will get two pieces of paper and he will get the same purchase. Dumping more money into the same amount of wealth just drives up the cost of the wealth until all the new money is accounted for. If you’ve been holding a lot of money, it will buy a lot less; you’ve been hurt.
That’s why government loves inflation: It can pay old debts with new, cheaper money. At your expense. So Bernanke’s Fed issues tons of new money, calling it ‘Quantitative Easing’ so as not to be too obvious.
So ignoring all the talk, government doesn’t solve economic problems because everything it can do, hurts the economy of productive private citizens; it has to be done with their money. And without their money, they are less productive.
The most helpful a government can be, is not at all. Leave the producers alone. It worked in 1921 for President Harding but no one’s tried it since. You don’t win elections promising to do nothing, not these days…
So we’ll continue to watch the government offer us needed blood transfusions just as soon as it finishes draining the blood from us to do it.