The $900 billion second stimulus is just a downpayment according to Joe Biden, the president elect of the United States, who wants trillions.
“It is necessary to spend the money now,” Biden said. “It will be in the trillions of dollars, the entire package . . . in order to keep the economy from collapsing this year, getting much, much worse, we should be investing significant amounts of money right now to grow the economy.”
The Biden administration wants to spend some $4 trillion on the Green Deal and Made in USA, with it to be seen on Thursday just how many trillions this third stimulus adds.
Biden wants it to come with a $2,000 check for every American after $600 looked too little following the $1,000 they got in April.
That should give a temporary boost and then… the question is whether a check economy becomes the new reality.
“I don’t ever remember [Franklin Roosevelt] . . . sending a damn penny to a human being. He gave ’em a job,” said Joe Manchin, the centrist Democratic senator from West Virginia.
That turned stocks slightly downwards, with Manchin quickly turning to say he’ll look at the proposal, closing Dow Jones up 0.2%.
That shows the risks of turning to stimulus for every economic problem as the economy starts depending on such stimulus, potentially leading to a debt trap that can end in hyperinflation.
The $600 check for example was not enough because December showed 140,000 jobs were lost. So now they want to give another check of $2,000, which also probably won’t be enough after a few months when they might just issue another check because it kind of worked the first time.
A lot of it so begins to sound like what both Karl Marx and Ludwig von Mises said. The two are in the very opposite spectrum of economic politics, but both have the same analysis in regards to a specific point.
Marx said through bigger booms and busts the economy will collapse. While Mises explained how, by coming up with the term of a crack-up boom.
As policy makers see the stimulus works, when its effects wear off they have the answer: another stimulus.
In each turn the stimulus needs to be bigger and bigger due to distortions in the economy until the stimulus no longer works because there has been a fundamental breakdown in the economy, and thus the boom cracks.
It cracks by people losing faith in fiat. As they see monetary supply the answer to everything, they begin expecting money to lose value, and thus they start getting rid of fiat as soon as they can, with the masses so becoming a force of their own and potentially an unstoppable force in about three months of madness that leads to a collapse.
The modern answer to this is government control of monetary supply, or communism in all but name, through the Modern Monetary Theory.
In effect, the fed no longer prints money, but the government does through debt, which the fed buys. Through this relationship, the government can borrow as much as it pleases without going bankrupt. To keep inflation at bay, they can take out money from the economy through taxes, licenses and fees.
In theory this sounds fine, in practice, the government is elected. In addition, the government is a complex machine of corrupt halls, lobbying, pressure groups, and outright bribery in all but name.
The people don’t quite vote for higher taxes especially if they are the ones being taxed. For the wealthy, they have their ways of putting in loopholes and the means of keeping them there. You’re left with licenses and fees, meaning regulations which are thus corrupted into performing a monetary function instead of ensuring good behavior. So contributing if not causing that fundamental breakdown.
Considering the situation however you can’t quite do nothing, but the danger of creating an economy dependent on government checks is obvious.
In addition, the effective merger of the government and the Federal Reserve Banks is erasing any constrain there may have been on maintaining debt in check, leading to a situation that all economists say is a cause of hyperinflation: the government being in charge of money printing.
Here however instead of Congress just printing this money in line with the constitution, it creates it through debt, 6% of which goes to commercial banks through interest payments.
Leading to a bankers economy, where not the elected but bankers are in charge, and sooner or later those bankers will demand payment of the debt by not marketing new debt, a payment the government can’t make because it owes far too much.
For now however trillions are in supply and Biden will get them. In addition the people have their own loophole as well, bitcoin. So keep on printing, but mind the crack-up.