Like a lot of things, economics is not inherently difficult to understand — what’s hard to understand is the complex stuff “experts” say when they’re trying to fool you. When they speak, turn on your baloney detector.
As I predicted over a year ago, the “economic stimulus” by the government did not stimulate the economy, it only increased government power. Government stimulus has never worked, and never will, and it’s very easy to understand why.
When we say the economy is growing, we’re saying that the total amount of wealth is increasing. Wealth increases when people like you and me create things that other people want. We acquire greater wealth by making something or by providing a service that other people want.
The government acquires wealth by confiscating it from people who have it. There are two ways the government does this. One is by collecting taxes. The other is by increasing the money supply. You have to understand that when the government increases the money supply, it is confiscating your wealth.
How does the government increase the money supply? One way is deficit spending. This causes inflation, which reduces the value of your money, which reduces your wealth. Never mind anyone’s fancy (and fanciful) explanations, when the government spends money it doesn’t have, it confiscates your wealth.
The government does this because it fears raising taxes enough to pay for all of its programs, but it still wants to give you things so you’ll keep supporting the government. Ultimately, the government does all of this because you and other voters want it to. It will only stop doing it when the voters stop tolerating it.
In the history of the world, no nation has ever created more wealth for its citizens by spending tax money or by deficit spending. It has only reduced the wealth of its citizens while consolidating more political power for itself.
Suppose you were the government. You want to spend two trillion dollars, but you’re afraid to tax the people more than one trillion — otherwise, they won’t vote for you. But you can’t just spend one trillion — otherwise, they won’t vote for you. So you have to spend the one trillion you taxed, plus another trillion dollars you borrowed.
Now, how will that borrowed money be paid off?
Anyone in his right mind understands — the extra trillion dollars will be paid off by taxing you (or your children) in the future. But it won’t be just a trillion dollars. It’ll be a trillion dollars plus interest. Plus whatever taxes you’re already paying.
Any brain-dead dummy (but not a politician) can see that this can’t go on for long. Eventually the economy collapses.
In fact, this has happened in every major economy in the history of the world. You’d think people would learn.
But you’d be wrong.