Patch_W_Adams Just Another Fox Blog Orphan

I was reading an article on how the Obama Administration is going to try and create OR save 3 million Jobs.    Ideas included weatherizing 1 million homes, shifting to a paperless health system, investing in disease prevention and modernizing schools and "green" jobs.

When the Government spends Money that it doesn't have, it is not a Fresh influx into the Market.  It is money that is either printed, borrowed or taxed.  If it's printed it devalues the dollar, if it's borrowed it has to be repayed with interest and increases the Debt and if it's taxed it's less money in the pockets of consumers.  When the Government spends money it is just playing a shell game.  Moving money from one area to another, it is not True stimulation to the economy.  So any supposed positive effects will be short lived and increase the repercusions to a later date.

The Government can lead the Consumers to water, hell even throw them in..but it can't make them drink....or spend.  You can build a Road but can't force someone to build a Strip mall next to it.  You can create Solar panels but can't force the Homeowner to spend the money to purchase and install them.   You can create Government Run Healthcare but you have to tax the hell out of the Citizens to pay for it, which leaves less money in the hands of the consumer and strips personal freedoms.   If the Government insists on spending by taking more from the citizens or increasing the debt or the devaluation of the dollar, it can have nothing but negative long term affects on the economy.

The Government can "create" demand by spending on infrastructure, Green tech, or healthcare.  But it's an artifical demand that is not supported in the long term by the market.   So the "Positive" from Government spending will also be artificial.  Which leads to a Market Bubble.

A Recession is a Market Correction that is usually brought on by "artifical" demand in the Market.   The Housing bubble was created by the Government "Creating" a demand in  High Risk Loans by purchasing the Loans through Fannie and Freddie and then repackaging these High Risk Loans with other loans and reselling them as investments. This encouraged Private banks to invest in an area that  normally would be considered too risky by lowering their lending standards, and giving loans to people they normally they would not which made the compaines less viable.  They all figured they would have time to sell their High Risk loans back to Freddie and Fannie and the Good Mortgage loans would offset the bad.  The Profits of this High Risk Lending encouraged the investment to spread to other sectors of the economy and create new Risky Loans.  ARM's, Home Equity Loans, No Money Down loans, ...... and as the Profits Grew things like 401ks started seeing these High Risk Loan Packages as investments and the idea of buying up Freddie and Fannie repackaged loans as investments grew like wildfire. 

Because of the lower standards of lending, more and more consumers bought homes that they could not really afford.  Which over time and with other market factors (like the high Oil Prices) this led to many people losing their homes to forclosure.  Which led to the only possible outcome of this irresponsible behavior.The artifical bubble popped. 

When the Home Mortgage bubble popped it caught alot of people with their pants down.  As the Bad Loans started to forclose they began to outnumber the Good Loans.  Home Builders couldn't repay their loans due to lack of sales and then it began to snowball, as more and more of these Investment Loan Packages began to lose money, companies, banks and investment brokerages that invested heavily in the Mortgage market started to go under.  Hence the Plea from the banks for a Bailout.  But even after they received th Bailout they did what they should have been doing in the first place to ensure their survival.  They stopped giving risky loans and held on to the Cash.  Which in turn did not unfreeze the credit market.

When the Public not only saw their home values plummet, gas prices skyrocket and the Banks appearing to be on the verge of collapse they did what anyone would do.....Stop Spending and hunker down.

But in so doing, it has sped up the snowball and turned it into an avalanche.   With Consumer spending down, demand for Goods went down.  Then companies starting losing profits, which in turn led to people losing their jobs.  Which in turn led to more belt tighting and less spending, which in turn lead to less demand, companies failing and more people losing their jobs.   Which in turn lead to less sales/income tax for local and federal governemnts, which lead to less services and more people losing their jobs.  It is a nasty cycle....that appears to have no end.

But it does.  Like an avalanche it must stop after it reaches the bottom of the hill.  It may destroy anything in it's path and may take alot of people with it..but it will stop.  Then rebuilding can begin.

But the concept of Government spending just keeps shoring up failure, encouraging irresponsible behavior and increasing Government debt while decreasing Consumer confidence.  Like an avalanche the Economy has to run it's course, and throwing things in it's path like Government Spending  just increases the size of the avalanche and increases the debris in it.  So instead of making the economy better or stopping the avalanche, the Government spending will just increase the size of the disaster and set up a New Market Bubble with the artifical Demand created by the Government Spending.   Which in turn..will lead to another Recession down the road.

The Free Market economy has to supply what the Consumers demand.  Any Artifically created demand will just cause a Market bubble which will lead to another Market Correction. 

Until the economy is allowed to run it's course and find it's own heading created by market demand not by Governmental interference.....we will always have Artifical Market Bubbles......

Which in the end will lead to more Government Control, less personal Freedom and less money in the Pockets of Consumers. 

Either we run with a failed concept of Artifical Government Created Economy.

Or we allow the Market to Correct itself and stop feeding the Artifical Market Bubble. 

We can't have our cake...and eat it too...  Something has to give...