Economic Collapse 2012 – Some Spending is Actually Bad For The Economy

September 12, 2012 4:47 pmViews: 144

 

Most politicians as well as President Obama's answer to the threat of almost sure economic collapse in 2012 the United States is to just go out and spend more money to keep our sagging economy going. That was also exactly George W. Bush's reaction when terrorists flew planes into the World Trade Center and Pentagon, just go spend some money and we will get our financial situation back in order. Do your part and be a good American.

That may sound like a solution to some people who are mostly liberal, but it is actually very bad advice in several situations. The way President Obama and the talking heads on CNBC and other financial channels play it up, you would think that consumers spending less money is always a bad thing. That is the furthest thing from the truth. There are times when a person they wants to do as little spending as possible because they are in debt and trying pay off some of that debt or they will restrict their spending because they saving money for a big purchase such as a car or a house or some kind of a capital investment.

What Bush did after 9-11 and Obama is encouraging now in light of our terrible economy is for people to borrow money to spend on consumption rather than production. When we consume, and borrow to do it, the only thing that grows is debt, not the capacity to actually produce more. When we spend to invest in say a house or a business spends to increase its means of production we get a larger capacity to produce in the future.

That's a pretty simple concept, but our politicians, starting with President Barack Obama always want people to spend and think that this debt-fueled prosperity they have created is a good thing. In reality, it is a disaster and will just drive people further into the money hole than they already are.

President Obama has even gone so far as to say, "We will act with the full force of the federal government to insure that the major banks that Americans depend on have enough confidence and enough money to lend in even more difficult times."

Obama wants to lend money to people, "in even more difficult times." And why exactly is that a good thing Mr President when they can't even pay their bills right now?

Peter Schiff in his new book "The Real Crash" goes into this in more detail and you can find it here.

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