Idiot’s Guide to Economic Stimulus

There’s a lot of confusion about what an economic system is. Some of us think it grows on trees. Others think we create and manage our economic system.

- The vision of economic systems growing on trees is sort of a survival of the fittest mind set. In this view, we know who is “fittest” by whoever “wins”, whatever that means at any given moment. No value need be created in this view. All that is necessary is to “win”.

- The vision an economic system we create and manage is one in which, when you or I create some value in the form of a service or product, we expect to receive fair compensation for our efforts. When you or I receive some service or product, we expect to give some fair compensation to the creators of those services or products. Value must be created in this view.

Most people mix these two visions into a stinky potpourri in which nothing makes sense. Sometimes the rules of the first apply. Sometimes the rules of the second view apply. In practice, for a period of about 30 years we have increasingly leaned toward the survival of the fittest view. In our minds we imagine that we are all engaged in a grand poker game.

Imagine this…

We all sit down to the poker table and agree to the rules.

• We know that skill and luck will determine who wins any given hand.

• We also know that as play proceeds, some players will gain an advantage over other players by amassing more chips than others.

• Those who amass more chips do so by luck, statistical awareness, cunning, deception, and if they can get away with it, cheating.

• As play proceeds, those who gain an advantage are able to buy hands by simply bankrupting the players who are down, but when they do this, players are forced to drop out. Game over.

• To keep the losers in the game—to continue amassing more wealth—the winners must STIMULATE the losers to ante up more of their residual wealth.

In the late 80′s and early 90′s the poker game STIMULUS was deregulation of pension money. Instead of holding that money in guaranteed, and therefore conservatively held investments, your retirement savings were put into play using 401K accounts so the poker game could continue. This created the DOT.COM boom and shortly thereafter, bust. Retirement funds gone.

Game over? Nope.

In the late 90′s the the poker game STIMULUS was created by the Fed’s artificially lowered interests rates that allowed losers to borrow on future earnings. The game continued in an unabashed orgy of consumption led by the housing boom, and shortly thereafter, housing bust. Borrowed money gone. Indentured servitude assured.

Game over? Nope.

Today, our government is using the money taxpayers have put into the system to STIMULATE the poker game again. Since we have no money and can no longer borrow, the money to keep the game going is being bled from our nation’s future—the nation our children will inherit.

Game over.

Solution? Walk away from the table!