Government has no place in the market. In so much that the government needs to spend money on things that constitute the proper role of government, there is nothing that the State does that is expressly efficient.
The State is unable to address the needs and/or wants of the populace well enough to signal an efficient use of scare resources; resources that have alternative uses. The government can, by force of gun or sword, dictate where money is spent, to be sure. But that government has neither the ability or will to intuit that “will of the people who is the mark of a dynamic market.
What does this mean?
It means the government is incapable of spending your money better than you are.
It is true, always has been, that there is only one careful spender of your money*:
That one careful spender of your money is….you. And only you, of course.
So, when government comes along and legislates a social “get well” program; beware! Be very wary!
Tangentially, and before we begin, consider this. The only way that government can spend your money is to first take it away from you. Until THAT happens, the government has no money to spend.
Now, back to the point.
People spend their money is such ways and manners that they feel suit themselves. In other words, people will spend their own money such that their own needs and or wants are best met. AND, by the way, they will typically spend that money very carefully.
It’s only when people [the government] spend other people’s money that they spend it most foolishly.
For proof of this concept, consider the price of this commodity. Where the price is indicative of the perceived value of that same commodity:
Pretty clear indication that the demand for that thing is low. Or, OR, the supply of that thing is pretty high. Or both. Whatever the case may be, people don’t wanna buy that thing at the price listed. So it continues to go down.
But, when there is a reason, a GOOD reason, government can step in and FIX that “thing” market so that it takes off and other “thing” markets related to that first “thing” market rise too. Right?
Did’ja see what just happened? The first graph is an adjusted version of the second unadjusted graph. See, the second graph is the real change in value of a home versus last year’s price. The first graph just deletes the “up” segment of the second one and slides the “down” version down.
What do the “up” version represent? You guessed it – government manipulation of a market. That’s where the up comes in. The down? Yeah…that’s where the government manipulation ends:
“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit. Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession. Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains.”
Awesome isn’t it?
Anyone who tells you that government “stimulus” work is crazy. Run away from them and hide your kids. Don’t believe me? Look at this cool graph:
Wanna know what that is? Car sales. Notice the trends and the funkyness going on? See where the graph is all like going down and then flattens out? And then starts to rise only peak at an abnormal level? Yeah…and then crash again only to go right back to rising pre-peak levels?
Yeah–“Cash For Clunkers”
The gains were offset by the slump only, in the end, to give way to the fact that Americans were buying more cars anyway.
Like I said—run away.
*P.S. I man love me some Milton Friedman