Consumer Spending Needed to Stimulate Economy

Reddit

What will happen when the feds really go to work on the dollar? Ben Bernanke has pledged to drop money from helicopters, if that is what it takes to head off a Japan-like slump.

Mr. Market wants a correction. The feds want to stop it. And never before have the feds had so many ways and means to try – all of which depend on reducing the value of the dollar in order to encourage the illusion of prosperity.

Here, we sense a pause – for clarification – is in order. When the feds speak of “stimulating” the economy with lower rates and rebates, they are merely speaking the humbug language of modern economics. The only thing that really stimulates a consumer economy is more consumer spending. And consumers can only do their consuming if they have money. So, the only thing the feds can do is to give them more money to spend. But the feds don’t have any real money. All they have is the machinery of credit and inflation – they can make borrowing less expensive, in nominal terms…and they can “print up” more pieces of green paper and distribute them to the public. That is to say, the only thing they can do is to inflate, lowering the value of each bit of currency in circulation.

The greenback floats on air; theoretically, the financial authorities can create a gust of wind and push it in any direction they want. A few years ago, a Paul Volcker might have resisted; he might have urged the Fed to protect the currency and curb inflation. But Tall Paul is now in the private sector…warning his clients to take cover. Some years ago, too, a few die-hard Republicans might have opposed a fiscal stimulus package as just more reckless spending from the Democrats. But now it is the Republicans who propose the stimulus…and there is only a single member of Congress who won’t go along – Dr. Ron Paul.

Nothing stands in the way of destroying the dollar…except Mr. Market himself.

It is shaping up to be a grand show. Mr. Market on one side. The market manipulators on the other. We don’t know how it will turn out…but we are pretty sure there will be blood on the mat when it is over.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

Latest posts by Bill Bonner (see all)

Reddit

Comments

  1. The last thing the American economy needs is more stimulus!

    We’ve had so much stimulus injected into us that I for one am beginning to feel like a pin-cushion.

    Honest money.

    Live within our means.

    Free and equitable trade.

    Banishment of the Warfare/Welfare state.

    The despotic government out of our pockets.

    These are things we need. More stimulus? It will be the death of us.

    Accurate_Perceptions
    January 23, 2008
    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au