Stimulus

STIMULATING STIMULUS

   A drunk once confided to me: The reason God created booze and brewski was so that ugly people could enjoy sex too. I really don’t know why the fellow directed his observation about ugly drunk people in my direction but I did think at length about what he apparently said in humor. You know things like, if God wanted to ensure that the planet would always be fully populated, creating booze and brewski would be an easy way to do it. You know, a sort of Divine Stimulus Program. 

   Nevertheless, I did curtail my alcohol consumption several-fold to test the drunk’s hypothesis and to lose some weight, what the sunshine boys call a Win, Win situation. On second thought, given that the hypothesis might indeed be correct, then perhaps it could end up being a Lose, Win situation. All of this brings to mind the famous quotation attributed to Sir Winston Churchill when Lady Astor accused him of being drunk, to wit the grand man was reported to have said, “Yes, madam, I am drunk. But in the morning I will be sober and you will still be ugly." But I digress.

    The Divine Stimulus Program to keep the planet populated got me to thinking about the Washington (Divine) Stimulus Program, you know, the one where the Government is creating money and the created money will somehow be injected into the economy which will then “stimulate” demand, which will then stimulate the economy to produce more goods, services, etc., which will stimulate the creation of jobs, which will stimulate the payment of money for labor (physical and intellectual), the payment of money for labor will then stimulate more demand for goods and services and, voila, a functioning and viable free market economy where only ruin and wreckage had once prevailed.

    Yeah, right. In days gone by, I was a Program Manager and I had to go to Washington DC to pitch my programs at Navy Headquarters in order to get money to execute my programs that the Navy wanted. The pitch was usually a view-graft presentation showing all of the elements of the program and how it would all come together, on time and within budget. Usually somewhere in the presentation things would inevitably get a little hazy on how a key element would occur (like requiring a technology that did not yet exist) and this is the place where a miracle would need to take place to make the program successful. 

   Well in reality there are no such things as miracles and the so-called Government stimulus program requires a miracle somewhere in there to make it successful, and here is the reason why. First, there are two basic kinds of economies, a Top Down Economy (managed economy, e.g., USSR) and a Bottom Up Economy (free market economy, e.g., USA), with many variations in between. The USA has a free market economy even though with each passing day it becomes more and more a managed economy. The government intervening into a free market place by throwing artificial money into the system (the stimulus program, with more about artificial money later) transforms the functioning of the free market because the intervention is an attempt to manage the economy rather than let the free market place manage the economy.

    Just like you can’t really pay off a credit card with a credit card, you really can’t manage a free market place by intervening in it. If you attempt to manage a free market, you can only further disrupt the functioning of the economy. This counterproductive situation should be patently obvious even to Flim Flam Politicians. Let’s talk about money. Money is a wonderful invention by man to facilitate the functioning of an economy. Without money, we would be reduced to barter, and we all understand that an economy based upon barter would leave us stuck in the Stone Age. Real money is the medium of exchange (gold, paper certificate, ones & zeros, etc.) that we all agree has the same value as our labor, goods or property. Money relies exclusively upon the faith and trust of the people that money is as valuable as their hard work, property and productive enterprise. Real money can only be produced by productive enterprise because only real money represents real value. The Government cannot produce real money, only productive enterprise can produce real money and only real money is viable in a free market place because it alone represents real value. Government can only produce artificial money because it (the Government) is not engaged in productive enterprise in a free market economy. If the Government produces (prints or borrows) artificial money, that artificial money can only dilute the value of real money (inflation) because it (artificial money) was not produced by productive enterprise. Unless a miracle occurs, throwing artificial money into a free market economy cannot possibly grow the economy because the artificial money does not represent real value and the intervention is doomed to eventual failure.

    The only possible way to restart the economy and cause it to grow is to create the conditions favorable to productive enterprise. This can be done by a moratorium on business taxes, eliminate capital gains tax, provide incentives for business to do business here rather than outsourcing factories and jobs to more favorable locations. The most important change that must occur before any long term improvement can occur is that our economy must change from a 70% consumer driven Gross National Product (GNP) to a more sustainable productive enterprise GNP. So here is the situation that we are stuck with in this Government Stimulus Intervention. We will all get drunk on artificial money, but in the morning we will be sober, and the economy will still be ugly.