Saturday, December 20, 2008

Fear Mongers at Work

The United States economy is going through a readjustment period as a result of past Federal Reserve money printing that distorted the structure of the economy.

Left alone, the readjustment period would likely resolve itself within six months. The Fed, however, is currently flooding the economy with more money, which will result in a return to some form of the old distorted structure (With destruction of the dollar as a byproduct). Under both of these scenarios, though, there is no need for an economic "stimulus" package, which is nothing more than taking money from the politically weak and transferring it to the politically powerful.

The incoming president-elect and vice-president-elect are prepping the politically weak for the upcoming transfer of another near-trillion dollars to the politically powerful. Talk about the economy being in recession for years, or that the economy is "near tanking" is nonsense. The only thing that will prolong the readjustment period is Fed money printing or government intervention in the economy. The transfer of wealth has nothing to do with with the readjustment process. If anything, it will slow the economy as it will take money from the productive elements of society, and thus lower incentives.

When Barack Obama warned today that economic recovery will not be swift that "It will take longer than any of us would like — years, not months," and that a huge stimulus package will be required, it is fear mongering not based on sound economic analysis.

When Joe Biden says that the U.S. economy is in danger of "absolutely tanking" and will need a second stimulus package in the $600-billion to $700-billion range, it is more of the same, fear mongering not based on sound economic analysis.

Wealth transfers never help an economy, indeed, a near-trillion in transfers is going to negatively impact a lot of people, whether it is from higher taxes or inflationary deficit spending.

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