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Would You Trust Grandfather or Big Brother With Your Money?

Trusting in sage advice would work for government

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My grandfather was named William Smith, and he was about as common a man as his name implies. He was an army sergeant in WW II, then came home and ran the family farm when the war was over. I doubt he ever heard of Keynesian or Austrian economic theories, but his words of wisdom made it clear just where he stood.

His advice and opinions were more of the commonsense variety:

  • Spend less than you make, and save the difference.
  • Never trust or depend on the government—look after yourself.

Big Brother promotes an entirely different way of living. It tells us an economy based on spending is the key to economic health and happiness. The more you spend, the more jobs are created, and the happier we are as a society. Even if we’re spending borrowed money, that is OK. It is our civic duty to just keep spending for the good of all.

Whenever there’s an economic slowdown, our glorified government leaders increase the government deficit and pump money into the economy. Why? To prime the spending pump and get our economy going once again.

The real result may be high inflation and unsustainable government debt, but economists are hell-bent on maintaining that their theories are correct. They keep saying the government is not spending enough, and laugh in the face of common sense.

The US federal government has missed the boat for quite some time, and it makes little difference which political party is in office. The spend-spend-spend program never seems to work.

You probably remember receiving a Bush tax rebate check back in 2001. They were supposed to “give families a break” and “help stimulate the economy.” The rebates were the results of retroactive tax legislation, and returned $38 billion to Americans taxpayers.

Hey, I’m all for lower taxes, but when WalMart (WMT) started advertising that it would happily cash the checks—ranging from $300 to $600 a pop—right at the checkout lines, something sure seemed fishy. Home Depot (HD) took it one step further: it offered customers credit based on the expected amount of the rebate. Wow, I wonder what my grandfather would have thought about that.

The rebate checks were an elaborate way to get Americans to spend $38 billion. They were supposed to get our economy going again. They were supposed to create jobs and an income tax base that would more than offset the $38 billion—plus whatever it cost to administer the rebate program (I won’t even wager a guess).

Real People Are Headed in a Different Direction

As Big Brother economists see it, when times are tough, you just go ahead and spend at a faster pace. Spending makes everything OK. Since the 2008 recession began, the federal government has stepped on the accelerator and added $7 trillion to the national debt. At the same time, unemployment is still close to 8%, and the number of people on food stamps has more than doubled.

Real people, however, are saying no to overspending and fighting back. Bloomberg reports:

“Three-plus years into a recovery from the worst financial crisis since the Great Depression, Americans are finally getting their finances back into shape, Federal Reserve figures show. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. Debt payments on that basis are the smallest in almost 18 years, while the delinquency rate for credit cards is the lowest since the end of 2008.”

This isn’t the first time regular folks have said “no” to spending and “yes” to common sense. As it turns out, when CNN/USA Today conducted a poll on those 2001 tax rebates I mentioned earlier, 79% of respondents planned to save the money or use it to pay bills.

Article printed from InvestorPlace Media,

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