Watch this great video and see the scorning and scoffing of a man predicting a financial meltdown due to the housing situation.
And read his common sense in yesterday’s Wall Street Journal:
Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn’t have a surplus, then it must come from taxes. If taxes don’t go up, then it must come from increased borrowing. If lenders won’t lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.
The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it’s called a recession, and it’s not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations.
Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.
If we look at government market interventions through this pragmatic lens, what can we expect from the coming avalanche of federal activism?
By borrowing more than it can ever pay back, the government will guarantee higher inflation for years to come, thereby diminishing the value of all that Americans have saved and acquired. For now the inflationary tide is being held back by the countervailing pressures of bursting asset bubbles in real estate and stocks, forced liquidations in commodities, and troubled retailers slashing prices to unload excess inventory. But when the dust settles, trillions of new dollars will remain, chasing a diminished supply of goods. We will be left with 1970s-style stagflation, only with a much sharper contraction and significantly higher inflation.
And then tell me: If consumer confidence is needed to restore our economy, why is Congress and the President-elect pursuing a “stimulus” agenda that worsens it?
Loading ...
RE: Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere.
So what is the difference between one group of people starting or funding an interprise and some other group of people doing the same? Calling one group of people “capitalists” and the other “polititians” makes no difference in the underlying, intrisic activity.
Capitalists cannot create but merely redirect. When a capitalist spends, the money has to come from somewhere….
Private enterprise usually obtains its money from selling a product or service. There's an element of fair and equitable trade there.
The government obtains its money by coercing it from its citizens with force.
Big difference.
Most of us think of taxes as a duty we owe to the community, and thus we put them in the category of “fair and equitable.” Some (few) disagree, and for those who do, your characterization may seem apt.
Nonetheless, it makes no difference to the question, which is, can government create jobs? The market effect of an infusion of capital is going to be the same regardless where the money came from. If an individual saves money and then invests it in the stock market, the money was simply “redirected” from whatever she would have bought with it into whatever investment she selected. If the government taxes her and invests the money, it has the same effect; it is redirected from whatever she would have spent it on to the selected investment. In both cases nothing occurs other than “redirection.” So if the government can't create jobs, neither can private investors. And if private investors can, then so can the government.
There are significant differences, however, and this is why it is legitimate to talk about the government “creating jobs.” When the government tells us that it will create jobs it goes without saying that the jobs that will be created are for our fellow citizens. A private investor who starts up a widget factory will do so in the most efficient manner possible. Thus the factory might be located in China where the cost of labor is much less. The government widget factory will most certainly be located in some congress-critter's district. Vola! Jobs! That is, American jobs.
So, government investment has as much job-creating potential as does private investment, but it has a more certain effect on the local, as opposed to the global, job market.
“The market effect of an infusion of capital is going to be the same regardless where the money came from.”
Wrong, wrong, wrong. Government takes money at the point of a gun and redirects it to enterprises according to their political pull, not according to their ability to create wealth. It is an inherently destructive operation. And it is immoral because the funds are forcibly extracted from the victims.
This is the polar opposite of enterprises funded by free individuals in a free economy.
Dana, you are not paying attention to the contention presented in the article. It maintained that “government cannot create jobs” not that “government cannot create jobs without pointing a gun.”
Private investors redirect money from one enterprise to another, whether they do it at the point of a gun or not. Government redirects money from one enterprise to another, whether it is done at the point of a gun or not. Who is pointing what at whom has no relevance at all to the economic effect. And since government is much less concerned about the efficiency of an investment, and more concerned about its local and immediate economic impact, government investment is, as promised, much more likely to produce jobs (that is, American jobs, right now) than is private investment.
Libertarians have been completely unsuccessful in convincing even a significant minority of the population that “taxation is theft.” That is, actually, why the authors of the article don't mention it and try to use a bogus utilitarian argument instead. They know that as soon as they start in with moralistic, ideological contentions, they will be considered extremist nuts and won't be taken seriously.
Most of us think of taxes as a duty we owe to the community, and thus we put them in the category of “reasonable, fair and equitable.” If you think otherwise, fine, but don't let that confuse you about the economic affect of government investment. If you do you will be eternally puzzled as to why people do the things they actually do.