The Government Soup Kitchen

Why can't the government just give everyone a million dollars?  Wouldn't that "boost" the economy?

This is the wrong idea on so many levels! 

1.  Money is not the same thing as wealth! (See my previous post.) When the government prints money (or borrows it) the government is adding money to the system.  Adding money to the system decreases its value, leading to inflation.  Have you seen the pictures of people with a wheelbarrow full of paper money on their way to the grocery store?

If the government were to give everyone $1,000,000, suddenly everything is going to cost a whole lot more!  Any money you have in the bank is going to be worth a whole lot less in terms of what you can get for it.  In effect, the government would be robbing you of your purchasing power, not giving you more. 

It's like a great big pot of soup.  Wealth is the vegetables, noodles, meat, and seasoning.  Money is just the water that everything floats in.  If the government adds more water to the pot, the soup just gets more watered down, and your share (expecially if that share is fixed--like people on fixed incomes) is going to have less nutritional value.  What the soup really needs, if it's going to feed more people, is more of the "wealth."

How is wealth created?  When you have a product or service that people want.  It's all about entrepreneurs--not government spending!

2. Printing money is another form of redistributing wealth.  (Taxes is the other way.) In actuality, when the government prints or borrows money and gives it to people (even if it distributes it equally to everyone), this actually amounts to redistributing wealth.  Let's say I have $10,000 in the bank.  If the government were to give everyone $1,000,000, the price for everything would go up exponentially.  Suddenly the $10,000 I have in the bank can only buy me what $1 could have bought me yesterday.  In effect, the government would have stolen $9,999 in purchasing power from me. 

Many people don't realize this, but the government has already printed (or borrowed) $46,000 per person, and they already spent it for you!!!  The federal deficit has reached 14 trillion, and the population of the U.S. is about 300 million. Many of us lose track of how much money is really being discussed here.  Instead of giving you your "fair share" of this printed money, the government has already spent it--yes, it is all gone! 

3. Government redistribution of wealth discourages wealth creation.  Why should I work hard for my money, if the government is going to take it from me anyway?  People don't take risks if there is no reward. 

When the government prints money, watering down the economic soup, the lines at real life soup kitchens just get longer.

What is Wealth?

Money, right?

Wrong!  This is a common misconception.  Money is only a means of exchange.  That means we use money to buy what we want.  The money itself has no significant value unless you are a coin collector. 

Many people would agree with the idea that money itself is not wealth.  Instead, they would argue that wealth is simply resources.  While this is closer to the right answer, it still is not quite correct.  Resources only have a value because people want them.

Wealth, simply put, is getting what you want.  The more often you can get what you want, the wealthier you are.