Oh… Now We’re in a Recession

This recent headline amongst the main-stream media is thankfully shedding some light on this previously cloudy subject. I have to admit, i wasn’t quite yet sure whether our economy was in rough shape. Luckily we have the National Bureau of Economic Research to let us know what’s really going on.

(Tongue planted firmly in cheek.)

The article continues on in more of the same obvious path, but towards the end it gets into some of the recommended “solutions”

“With rising costs of living, rising unemployment, record foreclosures and depleted savings, we must do more to help families make ends meet,” said Senate Majority Leader Harry Reid in a statement. “With the cooperation of our Republican colleagues, we intend to send a plan to the White House as soon as possible following President-elect Obama’s inauguration next month.”

The recommendation thus far seems to be some kind of coordinated bi-partisan stimulus plan. Oh, like the one we just gave Wall Street?  That’s working out well, and completely covered the problem there. At least it seems now the stimulus will be based on helping families and individual Americans, which will feel good.

However consider the problem inherent. Cost of living is increasing because of inflation. The dollar is losing it’s purchasing power because the government has decided that it can both cut taxes and spend more simply by printing money. Thus making all of our lives hell. The method is explained in my post Inflation Destroys. This money that the government is going to give us has to come from somewhere. Whether by taxes in which cases it’s simply the redistribution of wealth and there is no net benefit to the economy, only a reduction in efficiency. Or they are going to print it, the much more likely scenario. In that case when all of America suddenly has $300 more dollars or whatever the amount, they are going to go out and spend it most likely. Because that’s what they are going to be told to do, god forbid anyone ever saved or paid down debt, consumption is patriotic. But i digress, no matter what they decide to do with the money, it all comes down to more money chasing the same amount of goods, bidding up prices and reducing the value of each existing dollar.

The result is going to be a dependence on these stimulus plans for basic living and a new welfare state, eventually leading to runaway inflation and some really serious problems afterwords. At least, that’s what i think, how about you? You must be happy about getting some money soon from the government, i suppose i am. But how do you feel about a continued trend of a reduction in standard of living and dollar purchasing power?