Myth #96 We can spend our way out of recession without paying the fidler.

Everything has consequences.  Printing trillions of dollars of new money (printing and debt) to SAVE our Economy will not be done without a huge cost.  More dollars representing the same, or even less goods and services, means the dollars are worth less.  The other variable is its relative rank versus other currencies.  If other countries do the same thing the relative drop in our currency will be less, canceling the effect to some extent.  But, no other country is going quite as nuts as us in trying to spend their way out of this situation.

Capitalism and free markets are pushing us toward an adjustment in our lifestyle.  We as a people and country have been living outside of our means for a long time.  The house of cards have fallen-in on themselves.  The message we are being sent by the markets is that resources have been and are being irrationally distributed.  Credit, far beyond what is rational was used to probe up this irrational distribution for much longer time than a more prudent policy would have allowed.  

For instance, it is irrational that Fuld from Leman Brothers got $480 million managing a bank that he helped drive into bankrupt.   Keeping interest rates abnormally low to keep our economy going while loaning money to people to buy things they could not afford at any rate was an irrational distribution of resources.  

Obama spending money to stimulate the economy without a real plan to improve things will just lead to inflation.  Investing in our economy, our people, our infrastructure, etc. would also stimulate the economy without necessarily causing inflation assuming value was created equal to or greater than the monies spent.   The downside of investments is that they take time, usually years, to see the benefits.  We as a people have grown weary of working hard and waiting for our investments to bear fruit.  So, I suspect we will concentrate on quick fixes and pay for it later with higher inflation.