Evidence that our government’s ongoing bastardization of the economy is producing absurd outcomes can we witnessed all around you if only you care to look.
Begin with the first-person anecdotal example I learned of while walking today and encountering a fellow car buff. He told a tale of another classic car he’s bought and the conversation got into the rising prices of such cars, real estate, and all other manner of tangible goods.
During the course of this talk on price inflation, he shared that his wife last year began alternating weeks with another woman on their job. One would work a week, then take the next week off.
Bottom line: This guy’s wife, with all the unemployment add-ons she received for the weeks she didn’t work, ended up making $5,000 more for the year by working half of it, than she’d made working the entire previous year.
If you think this is sustainable long term, or good for the economy, you are gullible indeed.
It produces examples such as a few weeks back, when I had difficulty finding a worker to put up a piece of downspout on my house.
It leads to stories such as the Florida McDonald’s franchisee offering $50 bonuses just for a workers to come in and APPLY for a job. An investing podcast I listened to on today’s walk told of a landscaper who hired 20 or so people and none showed up for the first day of work, preferring to sit home and spend stimulus money.
The problem goes beyond the micro level to the macro-economic. Historically low interest rates have made borrowing easy to purchase cars, houses, whatever, thus increasing the prices of said goods.
Food and energy also have increased in price, a tax on everyone.
More importantly, this easy money has removed an important feedback item from the economy. Where before companies had to have a reason to exist, had to generate profits, now they can borrow their way into continued existence. Eventually they fail, but only after burning up a lot of capital.
That’s money that could have gone to more productive means had economic signals been intact instead of being distorted by governmental money policy.
Investments, too, benefit from loose money. Online brokerage applications see spikes in activity each time more stimulus money hits the banking accounts of its traders. The money often goes into the latest, hottest momentum play, fueling that trend until economic reality intrudes, as it always must in the long run.
Many of these traders aren’t bothering to go to work, preferring to attempt to leverage the stimulus money into riches.
Think of all the goods and services you use in a single day and what you would do if no one was incentivized enough to go to work and make the goods or perform the services.
We all can’t sit home and collect government handouts without the nation collapsing. That’s the harsh reality the socialists don’t bother to mention.
But government pursues this course, and not just in this country. A cynic would argue that whenever we get the raging inflation that accompanies such wild spending, governments, being the massive debtors they are, benefit from paying back those debts in depreciated currency.
Further, if price inflation touches off wage inflation, government benefits there, too, with higher tax revenue from higher income.
Economic growth, and the long-term financial health of the country will be adversely affected, but that’s a problem for down the line. For now it’s spend, spend, spend while you can and just live for today.