Spend to Revive the Economy?

Perhaps I'm just crazy but I disagree with the Fed Head Bernanke's thinking that it is consumer spending that is the key to pulling us out of this recession.   I may not have the piece of paper (AKA finance degree) that says I ought to know about finance, but I do have a brain and can not understand why the Fed thinks that spending more money when you already have a huge deficit will pull you out of a recession.    I thought by now the Fed would have slowed down it's printing and not promise anymore bailouts but they said they were going to do just the opposite at the last hearing.   I believe the bailouts and all this government spending in 2008 helped slow down the speed at which our economy is falling into recession but it did nothing to bring us out of one.  Deficit spending does not allow for a country to grow economically and improve it's productive capacity.   To think so is pure madness. Why?


It's all about the definition of money and how fiat currency, gold, precious metals, and other hard commodities like corn and food items are related.   I'm still surprised to hear how there is this perception that people have that the currency market, gold market, and other commodity markets are somehow separate entities.  If you look back into the history of banking you'll remember that every great empire, nation, sovereign entity all started off as nothing more than a village of people who lived with each other in order to survive.  There was no paper money, there was no gold.  Just food and shelter.  However, people don't think about how the banking system got started when they try to figure out where the market is going.  Instead, they look at numbers such as the GDP and statistics that are all skewed by the value of the US dollar and inflation to decide if the economy of this country is getting worse or better.   That is a huge mistake.

Without going into detail about the history of banking, suffice to say paper money is nothing more than a piece of paper.  It holds no intrinsic value unless there is actual demand for it.  Yet, time and time again people forget this simple fact.

It's the lack of demand for the US dollar abroad plus the Fed printing money like no tomorrow that is driving inflation up, not lack of demand for tangible goods on the store shelves and lack of spending.  It's just bizarre that the Fed and government would think that fearful out of work US citizens  would actually go out and spend like crazy if you hand them a check of US dollars.  The Fed and government are scratching their heads as to why the people aren't spending and why the economy is still in the dumps and I'm just looking at them and thinking why can't you see it?  The people are not spending because they are afraid that they may not have a job tomorrow.  The economy is down in the dumps because there is no foreign demand for US dollars and investors who have the money and capital to build the infrastructure that can increase the productive capacity of the US economy are not investing in the US because they simply can't turn a profit relative to their competitors who invest overseas.  Take the makers of the famous flashlight, Maglite.  They are one of the few american companies that make all of their products right here at home and they have been barely able to stay in business thanks to competition overseas and the american consumers refusing to buy american made products because they aren't cheap and will never be cheap so long as countries continue to keep their currency cheap compare to our USD.  

I say due to the current state of american infrastructure and the time it takes to rebuild productive infrastructure and the incredible speed at which paper currency can fall, ie the USD, the time spent waiting for infrastructure to be rebuilt will cause hardship for all in terms of employment levels and household purchasing power.

eh, that's just my opinion.