John Maynard Keynes, Brit statist and Socialist, is smiling from his grave. Best known for his economic theory which said that funding government to excess was good for the economy, because of government spending's "pump-priming" effects, Keynes would definitely approve of this idiotic deficit-boosting plan to forestall an obvious recession.
It's idiotic because most grade-school kids who have a piggy bank in which they save small change will tell you that this isn't real money the dot-gov is handing out, it's borrowed money. A borrowing crisis is what has set off this financial downturn anyway, and yet the government thinks we can pull out of the downturn with more borrowing?
The plan does several things, but will forever be known for it's worst part, which is the issuance of Federal checks to everyone. These checks won't be "serious" money, as the average Joe or Jill will get three or four hundred bucks, but supposedly it's enough to get us to spend our way out of the recession that you and I know we're in, but none of the econ boys will admit to yet.
In a still-further bit of foolishness, the government will tax you on this borrowed money that they're giving you. Before you've even cashed the check, the government will count those increased taxes as part of a revenue-enhancement that helps pay for giving you the money in the first place.
Of course, a perpetual money-machine is a pipe dream, they don't exist and never did, even when Keynes said so they didn't.
Real wealth is measurable by assessing the market value of things.
I have some real wealth. For example, my 1999 Mazda B2500 pickup is worth maybe $2,000. That's what I could sell it for, if I shined it up and armor-alled the tires like the gypsies do. The used vehicle market is a real market, based ONLY on what the vehicles within it could be sold for. The economy should be based on reality, but it isn't, and time is the reason. If you own General Motors, you don't want to have to sell a factory every time you need to borrow money, so the GM CFO goes to the bank and claims his company is worth x-number of billions of dollars, and the bank looks at his projections of coming sales, and decides to loan him y-number of dollars. This has to be done because physical pieces of commerce are best left in place creating wealth, instead of actually changing hands every time dollars need to be raised.
The problem comes when government thinks it can do the same thing. The government has taxing authority, the ability to skim the profits of business and individuals, and operate itself on those dollars. The Constitution, as amended, gives the government that authority. When Keynes' theories were popular here, up until Reagan, the government developed all sorts of mathematical models (which I could have learned to use but didn't) to predict the output of the economy. The first one was the Gross Domestic Product, the total sum of all the goods and services produced in the country. Then we became more international in our outlook, so we had to separate out the money that US corporations made overseas (because we aren't supposed to tax those profits directly, they get taxed where they are created), and foreign corporations working here made in this country (yes, we have the authority to tax all those profits, but we frequently give that authority away in deals to try to promote more business).
So, over the years, these business and taxing models have gotten to be less and less accurate as predictors of the future state of economies.
Simple is better.
There is one measure of how well any country is doing, and that is how well their currency is accepted for buying things on the international markets. Things like stocks and bonds, and contracts for delivery of things like oil.
We look at the horror that is the oil marketing business and we suffer the pain of watching the interminable rise in the price of petroleum, the most vital commodity in the world behind gold itself.
Mostly, though, we aren't seeing the value of oil rise, actually, we are seeing the value of the dollar fall (oil is measured in dollars per 42-gallon barrel, if you just got here from the planet Cylon). The government is responsible for the fall of the dollar, because just like the bonehead sub-prime mortgage borrowers, it can't pay for the money it prints (borrows) from us citizens.
Just in case you don't believe me, compare two indexes, the price of the aggregate of US stocks known as the Dow Industrials (DJIA) and the price of gold (which is fixed in London, against the prices of the world's currencies). The Dow is about the same as it has been, around $12,300 or so, give or take a few percentage points. Gold, however, has risen in the past few months from the $700s to over $921 today. The value of gold, as I've said here many times before, is a standard, and doesn't change. The prices paid for it in the various currencies of the world changes, and those prices are directly related to the stability of those currencies, or what the gold traders think those currencies will do in the future.
I trust the gold traders. They make few mistakes or bad projections, unlike the dot-gov, which totally failed to predict this recession.
So, what do we do with the comparison of the markets for stocks and gold we just did? We immediately come to the conclusion that false factors are at work in the stock market, and it is currently over-priced, which means it will fall.
My advice? I advise a "flight to quality". Buy oil contracts or gold, gold being the more stable because you have to deal for the oil in dollars at both ends. Just don't think you're rich when gold tops $1,000 as it will do in the coming weeks. You aren't rich, because the dollars you are pricing gold in are falling in value, your gold isn't actually generating more wealth for you. What it is doing is protecting your wealth. The greater percentage of your total wealth you have in gold, the better off you are, protected from your idiotic government which shouldn't be managing your child's piggy bank, let alone most of the available wealth on the planet.
So, this brings us to what we are going to do with our silly little rebate checks. The best thing to do is buy gold bullion. The worst thing to do is spend it on a weekend at the beach or a new I-Pod.
The second best thing is to buy guns and/or ammo, because those will increase in value very quickly, and have the additional potential to make you, as part of a determined citizenry, able to change the direction of the the idiot government which just issued you that phony check.
I love irony.
