The View From 1776
Friday, February 20, 2009
Tooth Fairy Economics
Tom Woods gives his perspective on why the current stimulus plan, indeed any stimulus plan, is worse than doing nothing.
A couple of quotes:
The primary fallacy of the tooth-fairy economics at the heart of the stimulus is the very idea that economic health is the product of government spending, which is financed either by borrowing (which leaves private businesses with a smaller share of the pool of savings for them to borrow from), printing money out of thin air, or direct seizure from the population. Whatever government spends the money on is necessarily arbitrary—government lacks the profit-and-loss feedback mechanism that keeps the private sector from squandering resources and employing factors of production in ways that do not cater to consumer wants…
In his recent press conference, President Obama cited the case of Japan as if it were evidence for his side of the argument. Exactly the opposite is true. Japan has done everything to itself that our government has done and is threatening to do to us, and with no results. From partial nationalization of its banking system to “stimulus” packages amounting to trillions of yen, from propping up zombie companies and dropping interest rates to zero, they’ve tried it all.
Naturally, the Keynesian response is that Japan simply didn’t spend enough. Oh? Thanks to the misnamed “stimulus” packages that the Japanese government imposed on its hapless people, Japan is the most indebted country in the developed world. So becoming the most indebted country in the developed world—and that’s saying something—still isn’t enough spending for Keynesians?