Governments plus central banks have become the lending company of first resort instead of the last resort, and this is immensely dangerous.
Global financial debt soars, inflation creeps within, and many of the so-called supply chain disruptions are the consequence of zombification after years of subsidizing low productivity and penalizing high productivity with increased taxes.
There are many reasons why nations should not “ spend now and deal with the consequences later. ” First, the spending is made by political figures that will not be held accountable for the malinvestment and risky outlay decisions. Furthermore, the price will always be paid by taxpayers and businesses.
Think about the irony of marketing an “ Inflation Reduction Act” that means spending more and monetizing more debt. But it is even more ironic to launch an “ inflation reduction act” after developing massive inflation with multitrillion-dollar stimulus plans and main bank balance sheet expansion. Government presents itself as the means to fix the problems it creates and goes by the bill twice in order to taxpayers.
Second, governments are extremely bad at picking winners but a whole lot worse at picking losers. Policy nudging, subsidies, and grants or loans are often aimed at obsolete or politically favored sectors which in turn leads to the rise in zombie companies. Government spending to “ save” businesses has a tendency to support those who are already highly indebted and with relevant issues to pay their debts. This really is bad, but picking duds is even worse. The world would not have a food and energy problems because of a disruption from nations that mean less than 10 percent of supply if regulation and laws would not have positioned enormous burdens on expense in farming, energy, and trade in general.
Third, the negative influence outweighs the positive. I remember a conversation with Judy Shelton in which she mentioned within 2021 how the US economic climate would be more powerful if the stimulus plan has not been implemented . She was right. The enormous spending plans have created a good unsurmountable structural deficit, as much programs are consolidated plus increased, and the negative effect on growth, inflation, and actual wages only a year . 5 later are undeniable.
It is undeniable that will economies come out of every turmoil with higher debt, reduce growth, weaker real income growth and poorer work creation. Yet, somehow, individuals think that the next time will be different. Someone said the same about 2020. Also it was different. You had your cheque and paid for it multiple times over with higher inflation and more taxes.
Critics may declare this is easy to say in a recovery, but how do we explain to citizens that government authorities should do nothing? Herein is situated another of the tricks from interventionists. We have grown used to the idea that if the government does no spend massively in the crisis, then it is doing “ nothing. ” Enormous demand-side policies are essential even when the problem has nothing to do with demand. Even worse, a trillion-dollar plan must be followed by a two trillion much more it will seem too little, no matter what the problem of the outcome is.
Guidelines should not be judged by their intentions, as Milton Friedman said, but by their results. And when the results are so poor because the ones we have witnessed for nearly two decades, we must warn about this constant decision to spend more.
Why is this so dangerous to use main banks and governments because the lender and solution of first resort? Because their particular main resource to carry out those policies is you. Your wealth. Expropriation of wealth is the other side from the “ social policy” gold coin. Taxes and inflation, or both. Some readers might think it is a clever idea in order to expropriate the wealth from the rich to support the economy, but by now they should realize that it is a lie. When you give extraordinary powers to a government based on the idea that stealing from your rich is valid, you might be giving power to politicians in order to steal from you as well. Plus they do. There is no single sort of massive government spending programs financed with higher fees on the rich that failed to end meaning higher taxes for all or more inflation, the particular tax on the poor.
When you read “ spend now, deal with the consequences later” what you are reading through is give me your budget because you will deal with the credit card balance later.
The next time you see the dreaded sentence that game titles this article, remember: there is nothing the government gives “ intended for free” that you do not pay one of many ways or the other.