[wind_magic]

Originally Posted by OsmundL

Out of curiosity: Could someone define "spending" here? I am not buying into any of the arguments, it just seems unclear what is talked about.

There has been spending on expanded government activity to fight recession, but also a great deal of investment, i.e. shares taken in banks and business, loans etc., all of which intended to be refunded/returned in some form?

The spending on war has also been a combination of money driving US manufacturers, wages for soldiers, and building Iraq infrastructure.

All these have vastly varying impacts on the economy now and future; so how do the figures distribute across various purposes?

OsmundL,

I think we can skip right past the argument you are getting ready to make about good spending vs. bad spending and get right to the point - is devaluing the currency actually going to fix anything ? Spending, in all of its forms right now, is simply an attempt to re-inflate the currency and stop the deflation. The proof is obvious enough, they are doing quantitative easing by (in the United States) buying Treasuries using money created by the Fed (something we wrote about here months before they even announced it), and there is only one reason to ever attempt such madness.

Here is a post I made before our current President was even elected, I wonder if we knew what he was going to do before he even knew, I say that because it seemed to take him a few months in office to figure out where all the buttons were.

Originally Posted by wind_magic

I think they could decide to print a lot more money. I don't mean this in a partisan political way, but if Obama wins he is no doubt going to be under a lot of pressure from Democrats to pull out the FDR Depression era play book, and that means printing money. We also already have a huge number of unfunded mandates such as the recent increases in FDIC insurance, the government essentially buying mortgages, etc, and all of those are things that the government won't be able to undo now that they have done them - just because you don't actually print the money doesn't mean that it isn't created, because it is still promised. This 700B$us bailout alone could turn into 2T$us very easily, the government has essentially agreed to print cash and swap it for burning paper. And lets not forget the national debt just sitting there begging to be monetized.

I think the best case for a real problem with currency devaluation is that it is so easy a choice right now, and Americans love easy. Printing kills a lot of birds with one stone - it takes savings away from a HUGE retirement class and forces them to work longer, it increases exports at a time when business might start to struggle, it allows the powers-that-be to push pretty buttons, and we all know how much they love to push pretty buttons, etc. Besides, who owns all of the government debt and why should the American public care if those bond holders get screwed, is the American public really going to shed a tear for the Chinese ? Printing currency is a beautiful siren singing .. if we have lots of deflation then the more money you print, the better things seem to get, and printing money at least for a while doesn't SEEM to have any downside. Printing money is the path of least resistance, because the hard way is to let folks suffer a while and increase productivity and work their way out of debt. The American public doesn't seem too big on working it's way out of debt, and I don't think the U.S. government is up for it either. The board just seems to be set for the obvious next move ...