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According to History, it’s Going To Take a Two-Thirds Reduction in Government Spending Before the Economic Recovery Will Begin

By: Steve Johnson

3/15/2010 - 35 Comments

History tells the story of how government debts and endless stimulus packages cannot restore the economy.

Economic central planning does not work because government does not have the key element for success
That key element for successful economic planning is the guiding wisdom of the consumer

The consumer is the champion of the economy because only the consumer can tell the market how many products and services they are willing to purchase and at what price they are willing to pay.

The consumer’s decisions determine profits and losses, which guide investments into the businesses that are capable to meet the demands of the consumers.

A government run economy disregards the decisions of the consumer and tries again and again to make decisions for consumers to force profits to appear to pay for the wages of the people they have hired.  But it never works

The only way for economic central planning to work is if the government takes control of how everyone spends their money and if they had an endless supply of money to continue spending on endless government programs.

As I have written before, we are on the path to hyperinflation and the dollar is going to have to sink in order for us to pay for the wealth we have already spent. 

Obama’s budget projections for the next ten years are impossible to finance.  Something very bad is going to happen between now and then.

History Has the Answer

It was not until 1947, when wartime spending ended and the government drastically cut spending before we truly recovered from the Great Depression.

From 1945 to 1948 the Federal government cut expenses from $98.4 billion to $33 billion.  Many were worried that this two-thirds cut to Federal spending would lead to another Great Depression with high unemployment, but they were all wrong.

What happen next was just the opposite.  Private-sector production increased by almost one-third in 1946 alone, as private capital quickly found its way into the businesses that were the most capable of meeting consumer demands. Unemployment dropped and corporate share prices soared.

Capitalism ended the Great Depression

It was capitalism that finally ended the Great Depression, once the bogus government central planning and massive intervention programs were scaled back and the federal budget was drastically reduced.

It’s a good thing that history repeating itself because nobody remembers it the first time.

Obama and Congress are repeating the Great Depression with the same misguided ideas of FDR.   But the future hope we have is that someone is bound to figure this out one of these days and start reversing the spending.

According to history, it’s going to take a two-thirds reduction in government spending before the economic recovery will begin.

Perhaps one of the best explanations of what happen can be found in Thomas J. Dilorenzo book, "How Capitalism Saved America".

How Capitalism Saved America: The untold history of our country  

"How Capitalism Saved America"



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