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SyndicateStimulus Packages vs. Wealth Creation, Part I
By Robert Ringer - Tuesday, January 27, 2009
By Robert Ringer
Compared to the cast of characters being appointed to high-level posts in Washington, Rod Blagojevich is starting to look appealing. The guy reeks with vintage Chicago chutzpah, he’s got style (What can you say about a spandex jogging outfit?), and he’s entertaining.
In fact, had B.O. appointed him Secretary of the Treasury, I think he would have added some much needed panache to the otherwise drab Obamastration. I challenge you to name anyone who has a better nose for money than Blago. He’s forgotten more about it than Ben Bernanke will ever know.
But, alas, it was not to be. Blago is far too busy talking to Geraldo and the Obama Bitches on The View. So, I guess it’s up to us common folks — the ones who are, in effect, coming up with the money to bail out Wall Street and the big banks — to figure out what Obama’s up to with his “stimulus package.”
And a good place to begin is with economics. Economics is defined by one dictionary as “the science that deals with the production, distribution, and consumption of wealth (goods and services).” Simple translation: Economics is the study of how people get the things they want.
By “the things they want,” I am referring to material things. Economics does not deal with love, religion, ethics, philosophy, or emotional issues. These and many other “things” may be important to most people, but they simply have no place in the science of economics.
What economists call “wealth” is food, clothing, TV sets, automobiles, and other products that people desire. Money itself is not wealth. Money is just a medium of exchange. To a businessman, wealth also may consist of factories and equipment, things that can be used to produce products and services that consumers want.
What stimulates real economic growth — i.e., the production of wealth — is action on the part of individuals trying to improve their own well being by obtaining what they desire on a voluntary-exchange basis. It is unfortunate that this bothers some people so much that they attempt to interfere with this natural process. What is even more unfortunate is that many of them are economists who are advocates of the strong arm of government as the most effective way to do it.
When such interference occurs, one of the basic laws of economics — the law of supply and demand — is violated. It is this law that establishes a logical and honest relationship among prices, wages, and costs. If, for example, prices go up, that causes demand to drop … which, in turn, causes employees to be laid off … which, in turn, causes wages to go down … which, in turn, causes fewer goods to be produced.
On the other hand, if natural conditions create an excess supply of goods in the marketplace, those goods will then be offered at a lower price. That, in turn, increases demand … which, in turn, pushes prices back up … which, in turn, attracts more entrepreneurs to that particular industry … which, in turn, leads to higher wages and more employees … and on and on the cycle goes. Unless, of course, government intervenes to stop the natural flow of the market — which is what it is doing as I write this, and what it is promising to do even more in the future.
What is good about the creation of an excess supply of goods in the marketplace is that it leads to an increase in plants and equipment, which, in turn, leads to the creation of both new jobs and new products. The sale of these products to consumers leads, hopefully, to profits — and a large percentage of those profits are then reinvested in still more plants and equipment or in research and development. Thus, economic growth continues and the well being of those who are willing to work is improved.
But what if profits are not reinvested? Good question, and one that I will address in Part II of this article.
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Copyright © 2012 Robert Ringer
ROBERT RINGER is a New York Times #1 bestselling author and host of the highly acclaimed Liberty Education Interview Series, which features interviews with top political, economic, and social leaders. He has appeared on Fox News, Fox Business, The Tonight Show, Today, The Dennis Miller Show, Good Morning America, The Lars Larson Show, ABC Nightline, and The Charlie Rose Show, and has been the subject of feature articles in such major publications as Time, People, The Wall Street Journal, Fortune, Barron's, and The New York Times.
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8 Responses to “Stimulus Packages vs. Wealth Creation, Part I”
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Bernie Madoff might be a better candidate for Treasury. Most government spending is a ponzi scheme, anyway. Why not put this man’s considerable skills to work for us.
As usual your comments make logical sense. I’ve been doing some philosophizing lately, perhaps from guilt induced from finally beginning to do well again. If Jesus were alive today, based on what I know of him, it seems he would be a democrat and spread the wealth (and pain) around. God I hope I’m wrong..comments?
Robert, you are preaching to the grade schoolers here with the basic economics lesson. Just as you said above ” Economics does not deal with love, religion, ethics, philosophy, or emotional issues”, niether should it deal with our federal government stacking the deck against us. Tell us how during the Nixon administration he and Kissinger helped the Middle East nations form OPEC and why. Tell us how during the Clinton administration he and Newt Gingerich caused millions of job loss with OPIC (Overseas Private Investment Corporation)and why. Tell us how our government encouraged loss of patent rights for our business investors and manufacturers so that Japan and China can knock off every product and sell it cheaper than it can possibly be made here. Tell us how every recent administration has acted as agents of foreign governments by betraying the American people. The simple truth is the New World Order is upon us, and simple economic models will never level the playing field as long as we have traitors in our government wanting to knock us down to 3rd world status.
Great introduction to economics. Especially that bit about economics being concerned with how people get what they want. That’s why Ludwig von Mises called his seminal work Human Action, when he wrote it.
It’s scary how much ignorance there is about something as simple as economics. My microeconomics teacher had it right when he said that even PhD level economists still used the intersection of supply and demand to determine the effects of intervention in the economy. If this simple tool were taught to every schoolchild in America, much of the nonsense we see today would go away.
How could so many people in America become so misinformed and so ignorant in such a short period of time with so much information available?
There is something terribly and horribly wrong.
The historical lessons of economics have shown that everything being done at present by the government is absolutely the wrong thing to do and although it may give the appearance of working in the short term, the long term negative and chronic malaise and decline of the country is all but assured.
Even the majority so called Ph.D. “experts”
in the field of economics failed to see the
current financial disaster in advance and as a result, a large majority of people who do not think for themselves and who follow the advice of these so called professionals were caught flatfooted when the dire straits of the economy were finally acknowledged.
The only minor bright spot that I can see at this point, is that those who have been and are perceiving reality correctly, will be able to take advantage of situation brought about by the growing mass delusions of the crowd.
I must respecfully disagree with Mr. Ringer. The CEOs who are heros to the conservatives are the ones who perverted the laws of economics not the goverment. Geo. Bush and swindler Dick Cheany had to be the most privite sector freindly goverment since Reagan.
To start a war so Haliburton can rip off the tax payer for billions. To lend money to people who can not pay it back, to assign a fictional value to assets and bundle them up and sell them as a legitimate investment is a criminal act it is not smart busniess.
This conservative mind set that the privite sector can do it better is nonsense. I would like to respectfully remind Mr. Ringer who I have a ton of respect for that all those new idustrial plants and reserach he is talking about is being done in China, India, and Taiwan not here in America.
Free market captialism has to be harnessed and regulated for the good of all, not to satisfiy the embarrasing greed of 3% of Americans.
This hate the goverment mindset to me is like magician pulling off a trick with one hand while you watch the other hand.
teddyboy46
Your statement “Geo. Bush and swindler Dick Cheany had to be the most privite sector freindly goverment since Reagan.” is ridiculous.
The growth of government under the Bush Administration has been humongous. It is the most anti-capitalistic administration of all time. It makes the Johnson administration’s “Great Society” schemes look quite innocuous in comparison. Bush and Cheney only paid lip service to free market capitalism. Their favorite brand of politics is fascism.
You made another statement “Free market captialism has to be harnessed and regulated for the good of all, not to satisfiy the embarrasing greed of 3% of Americans.”
Do you honestly believe that government and its henchmen (politicians) have actually displayed any honesty or ability to harness and regulate capitalism? I think not. Even if politicians possessed angelic qualities, the laws of economics prove that any interference with voluntary exchanges has undesirable consequences and only worsens the situation.
Anyway, our current economic collapse was caused by the Federal Reserve System artificially lowering interest rates and creating massive amounts of fiat money that fostered unsustainable economic booms—notably the housing boom. Did any politicians, except maybe Ron Paul, stand up and demand and end to this destructive, economy-destroying scheme? No! On the contrary, they wholeheartedly supported it.
I suggest that you read the works of Ludwig von Mises, Murray Rothbard, F.A Hayek, Henry Hazlitt and Ayn Rand. Also I believe you would greatly benefit from reading Robert Ringer’s “Restoring the American Dream.”
Robert A. Meyer
It’s time we return to the basics in this economy and tear down this house of cards, false prosperity. Our challenge going forward, however, will not be how to return to an industrial economy, rather the sustainable and profitable integration of an industrial and invisible (information as currency) economy. We’re also going to return to a savings society and depart from a consumer society, so getting back to basics, real returns on real money, is going to hurt, but is necessary.