Imagine a plot of land in the desert, consisting only of mesquite scrub and dust. If you assembled a system of sprinklers on this desert land, and ran them heavily enough, you could make the desert green with grass, corn, or even water loving willow trees. But then the water supply you are stealing from runs dry, and the sprinklers sit there, idle. The greenery of your efforts wilts, dies and turns to dust.
This is the story of government stimulus. First, the federal government stole â€“ yes, I said stole â€“ hundreds of billions of dollars to bail out first the banks, and then General Motors, and then spend hundreds of billions more on the Presidentâ€™s stimulus package, which promised to reignite the economy, fight of the recession, and reduce unemployment. The federal government crowded out private borrowers from the capital markets with their enormous deficits, damaging other sectors of the economy â€“ but no matter. The stimulus program would create or â€œsaveâ€ jobs elsewhere, making the whole thing worth while, somehow.
It didnâ€™t work. It was never going to work. All we were left with was another economic bubble; this one not in stocks or in housing, but in government spending. Now, the cash supporting this situation â€“ the air inflating the bubble â€“ is being printed, at the cost of inflation and rising prices on everything; essentially theft through increased costs of living. Consumer spending is shifting to cover the increased costs of food and fuel, to the detriment of other goods and services.
As it became an obvious failure, the first impulse was to double down with another stimulus program â€“ digging a deeper well. But not this time; the wealth of the country was depleted, the water was gone.
Now, we stand at the beginning of the double-dip recession – a recession within the depression that was born from the last recession. This time there is no way out and no way to delay. The economy as a whole can no longer afford to supply the cash to keep the government spending bubble inflated, a bubble that never should have existed in the first place.
It is time for the economy to be purged of all the mal-investments of both government and business and finally rebalance itself, something which it has not had a chance to do. Government stimulus was doomed from the beginning because it only stimulated a portion of the economy that depended entirely upon government money; the rest of the economy was damaged by this, not improved by it, and governments can, in fact, run out of money.
The next phase of the recession will be more painful than the first; with an economy that has been further weakened and a government lacking the resources to do much of anything, the next big dip is going to be one for the history books â€“ which is terrifying.