Friday, November 28, 2008

Economics Perplexities

The ostensible reason for the big bailout is that Americans have a credit shortage. They can't buy a car, a house, a stereo, a computer, without credit. Businesses can't meet payroll without a loan. So, to "prime the pump", the US Government is "injecting liquidity into the banking system". Where did the USG get all this money? They borrowed it, of course. Huh? Where does a deficit-riddled USG get a loan? And doesn't this sound a bit circular?
In the old days, prosperity was linked to savings. Savings allowed new business ventures to start. Nobody says that anymore. Now prosperity is dependent on credit card shopping sprees. So if everything you own is financed, you don't own a whole hell of a lot, do you? Where lies the real road to prosperity?

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