If you could spend vast amounts of other people’s money just by saying a few magic words, wouldn’t you be tempted to do it? Barack Obama has spent hundreds of billions of dollars of the taxpayers’ money just by using the magic words “stimulus” and “jobs.”
It doesn’t matter politically that the stimulus is not actually stimulating and that the unemployment rate remains up near double-digit levels, despite all the spending and all the rhetoric about jobs. And of course nothing negative will ever matter to those who are part of the Obama cult, including many in the media.
But, for the rest of us, there is a lot to think about in the economic disaster that we are in.
Not only has all the runaway spending and rapid escalation of the deficit to record levels failed to make any real headway in reducing unemployment, all this money pumped into the economy has also failed to produce inflation. The latter is a good thing in itself but its implications are sobering.
How can you pour trillions of dollars into the economy and not even see the price level go up significantly? Economists have long known that it is not just the amount of money, but also the speed with which it circulates, that affects the price level.
Last year the Wall Street Journal reported that the velocity of circulation of money in the American economy has plummeted to its lowest level in half a century. Money that people don’t spend does not cause inflation. It also does not stimulate the economy.
The current issue of Bloomberg Businessweek has a feature article about businesses that are just holding on to huge sums of money. They say, for example, that the pharmaceutical company Pfizer is holding on to $26 billion. If so, there should not be any great mystery as to why they don’t invest it.
With the Obama administration being on an anti-business kick, boasting of putting their foot on some business’ neck, and the president talking about putting his foot on another part of the anatomy, with Congress coming up with more and more red tape, more mandates and more heavy-handed interventions in businesses, would you risk $26 billion that you might not even be able to get back, much less make any money on the deal?
Pfizer is not unique.
This is intuitively obvious to the casual observer…businesses will not expand because they are afraid of what anti-business policies (healthcare taxes/refusal to renew Bush tax cuts/skyrocketing electricity from cap and trade/takeover of GM/Chrysler) that will come from the Marxists that are now in power
Of course, we all know that the reason the stimulus hasn't worked is because it wasn't big enough … er, it wasn't properly administered … er, one of those things. It has to be, because the economic arguments supporting stimulus are impeccable.
No, no, no, you forgot the other magic words "It's Bush's fault"
God, I love reading this man's work!
Wish I had discovered him a couple of decades ago.
Sowell should be required reading starting in elementary school, so that kids get USEFUL information pumped into their brains.
I feel the same way Nick. He is very articulate and talks (or writes) so the average joe can understand….just wish more would listen and those like him (i.e. Walter Williams)
Fox News and the Republican party should make better use of the two free-market
economists Thomas Sowell and Walter Williams. These outstanding black conservatives should be on TV regularly.
Obama must have been a student of Plato. Here is Plato in the Gorgias: "The rhetorician and his rhetoric will have the same relation to all the other arts: there is no need for rhetoric to know the facts at all, for it has hit upon a means of persuasion that enables it to appear in the eyes of the ignorant, to know more than those who really know." Socrates was supposed to have said that a few hundred years B.C. The only thing we learn from history is that no-one learns anything from history.
The first rule of economics even based on supply and demand is that increasing production must come before any increase in distribution. We are not unlike the farmers who are eating their seed grain in the winter and still expecting to plant a crop in the spring with nothing.
If I were to compile a list of the five most brilliant men in America Dr. Sowell, you would be on it. I am always impressed by you intelligence and great wisdom. Maybe Mr. Obama should hold a "beer summit" with you and Walter E. Williams. It could not hurt.
Obama is following the Alinsky model: bankrupt the country, blame it on capitalism, then start a fascist socialistic regime.
Did you know, that if the 860 billion dollars was divided by 16 million people, presumably the number of unemployed, they would have each received $54,000? Instead of them collecting unemployment, we could have been paying them to do something constructive.
Oh how this house of cards crumbles…Pfizer & the other holdouts will be oh so rich when dollar, totally tanks…Invest in Gold it will be worth something, when China decides to repo this country…As the collateral, our leaders have made it…Teach your kids Mandarin with Rosetta stone…;)
What a great article, I found this to be quite an enjoyable read.
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Everything the Democrats do via 'Stimulating" is anti stimulus for the economy.
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