It’s stimulus check time!
That’s right, boys and girls, it’s that time again to get the economy going with stimulus checks!
But, wait a minute. Where do those stimulus checks come from anyway?
Does the government have a magical money tree that creates value? No, probably not that.
Does the government take in more money in tax revenue than they spend? No, not that, either.
Does the government borrow from others by issuing government bonds? Yes, that’s the one.
Okay, so who buys those bonds? Is it savers, foreign and domestic? Yes, indeed.
So, that means the money is going from people saving to people spending, right?
So, the way to get the economy going, forever after, is to stop saving and start spending? Hmmm…that’s some interesting logic.
Let’s take this to its logical conclusion. Growth comes from consuming, according to this thinking.
So, if we just consume everything we’ve produced, we’ve maximized growth?
That doesn’t seem to make sense.
Oh yeh! Now I get it! The way to grow is to save some of what you produce, and then use those savings to produce more next time around.
For example, the farmer who eats his seed corn will never grow production. But, the farmer who saves a bit his corn each year as seed for the next year will produce larger and larger crops each year as he saves more and more seed corn.
The only way to have growth is not to consume all you produce, but to save some of it over time and plow that saving back into production. You can’t eat corn you haven’t produced. You have to produce before you can consume. Production, built from saving, is the way to growth–not consumption.
So, what in the heck is borrowing money from savers and giving it to consumers going to do? Reduce future growth. Does that sound like a good plan for getting the economy growing again?
Only if you measure growth by adding up consumption.
I think I’ll put my stimulus check into savings. Then, maybe, we’ll have a snowball’s chance in hell of competing with the foreigners we’re selling the asset of our country to.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.