Years ago, I was optimistic about government. I thought the people there were doing the best they could. Today, I still think that. That’s why I’ve become so pessimistic.
Take government stimulus. The bankers got theirs (yours and mine, actually), so they could absorb those bad mortgages and loan money again. They used their stimulus to remodel their executive offices. With the rest they bought postage stamps.
With the postage stamps they sent out notices to their credit card customers, cutting their credit limits in half and pointing out that they were now over-limit on their new, half-sized credit cards. As such, they were in default and would have to pay 35 percent interest on their balances with Mega Stimulus Bank, its associates, heirs, assigns and knee-breakers until you-know-what freezes over.
Yup. No doubt about it. Cutting credit limits and upping monthly payments will stimulate the economy and get people working again.
So, where does Mega Stimulus Bank borrow the money it needs to loan to all these folks? Why, the Federal Reserve. And what’s the effective Federal Reserve rate these days? Right about zero.
So where does the Federal Reserve borrow all that cheap money? Well, they create all that cheap money out of thin electrons. And like salmon with a spawning instinct, those exhausted little electrons are going to show up every year for the rest of your life on your tax bill. There’s even a new tax form: “How much did you make last year? Write it down. Send it in.” Yeah, baby! That should stimulate demand and get people working again!
Now, even the government seems to be questioning the results of their earlier efforts. They want to get more directly involved in stimulating the economy. Infrastructure projects – by golly, that’s the ticket!
“Oh, please, Mr. Fed: I will gladly pay you tomorrow for a trillion dollars today!” (Understand, we’re now talking about your kid’s tax bills for paying this back.)
So here’s how that works. A bridge that’s been carrying traffic the last 50 years between, say, Nevada and Mexifornia, will be torn down and replaced. When they’re finished, it will carry traffic between Nevada and Mexifornia. Viola! Stimulus.
The last time America went through a depression, things like Grand Coulee Dam were built. That single project turned Eastern Washington state from a tumbleweed museum into a bread basket. It also provided cheap electricity to the entire region.
Why do I have the feeling that in today’s government, the next great stimulus project will be to tear down Grand Coulee Dam?
