Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17
SPX Stocks Bull Market Update - 14th Jan 17
President Trump vs the Deep State that Hides in Plain Sight - 14th Jan 17
The Impact of Sir Alex Ferguson's Retirement on Man United's Share Price - 14th Jan 17
What Can Stock Market Tell You About Politics? - 13th Jan 17
Big Gold Buying Coming 2017 - 13th Jan 17
A Bullish Case for Gold 2017 - 13th Jan 17
Will Stocks Bull Market Continue to Charge or is it Time to Sell the News - 13th Jan 17
Gold and Silver Off To Shining Start to 2017 - 13th Jan 17
Gold’s Fundamental Outlook for 2017 - 13th Jan 17
Is trading stocks and shares just as luck-based as roulette? - 13th Jan 17
Trump CIA Like Nazi Germany - Fake MI6 Intelligence leaked to Fake News Mainstream Media - 13th Jan 17
USD in Decline. SPX and TNX May Follow - 12th Jan 17
CIA War On Trump - Leaks Fake MI6 Intelligence to Fake News Broadcast Media - 12th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Is Government Stimulus Spending the Answer?

Politics / Economic Stimulus Mar 02, 2009 - 09:10 PM GMT

By: Dr_Ron_Paul

Politics This week, Congress and the administration once again showed their lack of economic understanding, as they ramped up spending to record levels. On the surface, maybe it does look to some like the economic crisis is a liquidity problem, that the economy is in trouble because money is not changing hands at the pace it once did in the boom years. They believe that to get back to a booming economy money needs to start changing hands again - and the quickest way to do this is for the federal government to massively expand spending to pump new money into the system. If this is the extent of their understanding, no wonder they call for spending, taxing, bailouts and inflation.


If spending was the solution, we never would have had a problem. During the last eight years, we've blown up the size of government and certainly had no want of spending on foreign or domestic policy. The Bush administration increased spending almost 20% its first term, and nearly doubled the national debt by the end of the second term. Certainly the case cannot be made that lack of government spending created the problem or can be the solution.

This is mirrored in American households. According to CNN private sector debt is 365% of private sector gross domestic product. Many relied simply on steady and continued increase in home values to enable spending and secure more debt. That trend has proven unsustainable and many Americans are adjusting their finances accordingly. For the first time, household debt is beginning to fall as consumers wake up to the realities of paying off debt and living within their means.

Wouldn't it be great if the government would do the same?

A lot of capital and liquidity is out there waiting in the wings as the new administration is bringing about government uncertainty, a concept discussed by Robert Higgs as prolonging the Great Depression. In other words, it is a foregone conclusion that government will act. But, like a chicken with its head cut off, no one knows which way it will run, just that it will flail about wildly until it collapses.

Why start a business, when businesses could face the brunt of an increase in future taxation? Similarly, why hire a new employee if tax policy will just force you to fire them later on to stay afloat? Why buy a house, when you have no idea how future government meddling in the housing market will affect its value? Why spend at the shopping mall, or buy a new car when you don't know how tax policy will affect your family budget, or if your job will come under the axe because your employer's tax burden is increased?

I argue these kinds of questions and concerns contribute to the weakening economy. This type of tax policy keeps capital out of third world nations, and now is keeping capital in hiding here in the US. People are concerned about security and savings again, retrenching their household and business budgets. The economy could be helped if the government would just get out of the way and restore sound monetary and fiscal policies.

Dr. Ron Paul
Project Freedom

Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

Dr. Ron Paul Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife