I submit a lot of what I write to Associated Content. They are a more sure-fire means for my content to be read by more people. I have not created that strong of delivery system but, I am creating the content. So, I will borrow the delivery system of AC–makes sense to me.
While I was looking through what other content producers on AC have written, I came across an article about helping the US economy recover. The article‘s title is How You Too Can Help the US Economy Get Better: Really, It’s Not that Difficult. The title alone was rather intriguing–mostly because of its length and use of mostly single syllable words. I’m a big fan of using as few and as low syllable words as possible when I am seriously editing my writing. There is something elegant about sentences being short, simple, and to the point.
The title didn’t give away the author’s prescription for saving the ailing US economy so I had to read the article. I consider myself a student of the Austrian School of Economics. I read articles on Mises.org and LewRockwell.com daily. I have a few books on the subject as well but, most of what I’ve learned have come from the articles, videos, and podcasts on Mises.org.
The author’s prescription to the illness is this: spend more. I had to laugh as the idea of spending the economy into prosperity is a misguided Keynesian pipe-dream. The mainstream media is also advocating that we should spend more and that a decrease in consumer spending is bad news.
It was recently reported the consumer borrowing dropped by $7.94 billion dollars in November. That was really good news as this means Americans are saving and paying down debt. The media reported it as bad news and a bad sign for the economy. The truth is, this is good for the economy.
The idea that we can have a sustainable economy by spending like drunken sailors is wishful thinking. The reason for our economic problems is because we were spending too much. The average savings rate was effectively below zero when debt was calculated. It is not possible to have growth without capital and capital can only be obtained through savings. Printing money through various stimulus packages or bailouts is only going to make the problem worse.
All of the businesses or business investments–also known as risks–that are not able to stay afloat should be allowed to disappear. If consumers–you and me–are not willing to spend money on an item then maybe we don’t need it. The idea that everyone is doing stop spending money is absurd. We still need to buy food, clothes, groceries, and other necessities.
Money will be spent. It is just a matter of whether or not businesses are selling things of value. We are no longer going to waste money on things we don’t need or don’t value enough to trade money for. By not saving, and spending as the author of the AC article suggests, we are only going to dig ourselves into a deeper hole. The first step in getting out of a hole is to stop digging.
Economics tells us that the sooner we can free up capital being used in non-productive areas, the quicker it can be used by more productive and creative people to create products and industries that never existed before. The way to do this is not by spending money with companies who are not offering things we find valuable. That is only going to reinforce the false idea that we value what they are selling.
There is no good reason to just randomly spend money on things in the name of “improving the economy”. I have often joked with friends that I or they are propping up the US economy when we go on a spending spree–this was when things weren’t as bad.
The most atrocious part of the AC article was about investing. The author suggests we put money into the stock market because the panic and fear as caused everyone to leave and therefore stocks are undervalued. This may or may not be the case but, there is no clear or even half-vague indication that the stock market has hit a bottom. The Austrian theory of the business cycle will tell you that we far from a bottom with all the recent government intervention.
With the amount of inflation that we will be experiencing, the safest “investment” to make is in commodities–look up Jim Rogers for his interviews on the topic. If there is one thing that the US economy and the world economy is going to be short on, it will be things of real value like agriculture and metals.
If you really want to make an investment, invest in your future by paying down your loans–student loans, car loans, mortgages, credit cards, etc. The stock market is not the best place for just anyone to jump in right now.
The author points out that what goes down must come up eventually. That may be true but, it is the time it takes for the market to come back up that is the problem. It could take years or decades. What are the opportunity costs of that?
The real means of helping the US economy recover is to stop spending and start saving and paying down debt. If the secret to global prosperity was to simply spend every dollar we made, poverty would have been eliminated a long time ago.
