Big Spenders Not Key to Real Economic Health
The audio above begins with a reading from Chapter 10 of Henry Hazlitt's The Failure of the New Economics, ending with Patrick Barrington's sarcastic poem "I Want to be a Consumer," published in a 1934 issue of Punch, mocking the prevailing economic thought of the time that would come to sweep away governments with the promise of miraculousity of magical money from nowhere.
For as long as most of us can remember, we’ve been told that spending money—shopping—is good for the economy! The conventional wisdom is practically branded into our brains. What’s the pat response, repeatedly mindlessly by public officials and media alike, when a city or region is devastated by hurricane, flood or oil spills, even in the wake of 9-11? Plan your vacation in the affected region, and go spend money. All of us have heard that only a resumption of “consumer spending” will turn around our ailing economy and set us on the path to prosperity again.
But the truth is that consumer spending, usually accomplished by means of increased consumer debt, is not the ticket to economic prosperity. In fact, spending and debt only fuel the runaway currency inflation pyramid, keeping our debt-dependent currency and banking systems on artificial life support for a few more weeks or years before their ultimate crash.
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Saving is not the same as hoarding money, economist and writer Henry Hazlitt tells us. Following a financial crisis, it is human nature to stop both spending and investment as we wait for prices to fall further and the value of our currency to rise. But that type of saving is not the cause of economic depression; rather it is the consequence.