Everybody seems to hanker to get something for nothing. Because of that universal desire, and our inability to satisfy it, we have all these fairy tales about the tragic costs of magic.
Yes, the cost of something-for-nothing can be shockingly high. In some savvy tales, audacious hopefuls wind up giving away first-born children to pay for their something-for-nothing.
For half a year, our leaders have gone on a something-for-nothing binge, throwing money at a downturned economy. Lots of money. Trillions.
Where does it come from?
Magic?
Not exactly. Politicians and financiers use complicated tricky maneuvers to gain money they don’t have.
With the help of the Federal Reserve, they can sorta create money. But that creation has costs. It makes the money less valuable. We don’t always see this right away. Right now people are switching away from spending, so a lot of new money goes into savings. When people start spending again, though, prices will rise and money’s value will plunge. Gold into lead.
Politicians also get money by borrowing. But that also comes at a cost: It must be paid back. Here, politicians play an old fairy tale game, not exactly giving up their first-born, but saddling our children and grandchildren with debt. It’s a mean, wicked stepmother kind of policy.
Maybe we should be reading more fairy tales these days. For the realism.
This is Common Sense. I’m Paul Jacob.
7 replies on “Our Fairy-Tale Economy”
Fairy-Tail?
If it was a dream it would be a nighmare.
The only thing that will turn the econ around is people working. When people work they buy things and pay taxes. Simple but true.
I would rather have them building wind turbins or putting up solar panels. That way at least when I ask were did the money go they could point to something they built.
As it is I see nothing.
Keep at ’em Paul.
Sorry, Timothy. If you mean wind turbines and solar panels for distribution through the grid (Pickens Plan), I would prefer they dug holes in the desert and filled them up. These are two forms of “renewable” energy that, with current technology, are worse than useless, by any measure. Their electricty costs a lot, driving up everybody’s cost for everything. They probably use more energy than they produce. They probably create more carbon dioxide than they displace, if you are worried about that and I’m not.
Thoreau’s statement about government efficacy seems appropriate for these times. “Government never furthered any enterprise but by the alacrity with which it got out of the way.”
Save us from windmills, please.
Above my desk is my favorite acronyn: TANSTAAFL. It is short for “There Ain’t No Such Thing As A Free Lunch.z” It is true — always somebody pays!
Please, no fairy tales. They give us a vivid description of how jealousy and envy can drive some people to do bad things but they almost always end with the good people living happily ever after. Pure fiction. Good people aren’t always so lucky in the real world. Hard-working people see their savings and livelihoods destroyed while crooks live on the tropical island or in the tax haven, safe from retribution. The fairy tale mentality needs some cold water thrown over it.
“They can sorta creat money”.No they can’t but they can monetize debt and have been doing so for generations.Another name for it is “creating inflation” And they’ve been doing that for years as well.Read the history of Post- WW1 Germany. Money is no longer a store house of value and they have been depreciating the value of it year after year. Now they’re going to do it a little bit faster.
Two corrections to your otherwise valid criticism of the government’s reckless spending. You say “Right now people are switching away from spending, so a lot of new money goes into savings. When people start spending again, though, prices will rise and money’s value will plunge.”
First, savings are spent by borrowers. Banks and other depository institutions don’t lock up our demand deposits, savings deposits, CDs, money market deposits, mutual funds, etc. These are the sources of funds for loans. That savings are not spent is a Keynesian confusion of language. Only hoarded cash is not spent.
Second, people never stop spending till they die. Indeed, the rate of inflation now is not zero. Prices are rising, but in periods of low inflation like we have, it does take some time before the increased rate of money creation heats up the rate of inflation.
Mr. Osness I understand. My comment was born of frustration. I do not necessarily support the Pickens Plan.
I do NOT support this bailout stuff in any way shape or form. It is just money down the drain.
Down the drain it goes, and we will not see anything, not even a wind turbine. Nothing. Just debt.
Again, Paul keep up the good work.