I think this is the trillion dollar question. Unquestionably in the past government spending has helped stimulate the economy. So the answer is yes. But wait...this question is more complicated than that. Perhaps a better question is...Can Government spending always stimulate the economy?
I think it's fair to say that the "economy" is an almost infinitely complex witches' brew of a million different discrete ingredients. These separate ingredients together create a potion that is greater or more powerful that the sum of its parts. There is one ingredient however that is the most powerful of all, and that is belief. When there is little belief or faith in the economy investing slows. When there is no faith in the economy people don't spend their money. When every bet is a guaranteed loser, people just don't bet...Unless they're worth billions, like Warren Buffet for instance.
When you get to the level of extreme wealth that someone like Warren Buffet has, rational explanations just go out the window. Here is someone who says he wants to pay more taxes. We all heard him say it. Is that rational? Either he's fallen victim to age induced dementia, or he's playing a deeper game. He's too smart a businessman to toss away five billion on a longshot. I just don't buy that explanation.
Warren Buffet invested in a failing bank and perhaps we're supposed to believe that, since he's always been fairly successful as an investor, this huge investment proves that this bank will make a big comeback. Maybe, we're even supposed to believe that all the banks and the economy itself are about to make a miraculous recovery... I call shenanigans! Where's the SEC on this? It doesn't make sense and I suspect some shady behind the scenes double dealing. Bank of America is a publicly traded stock and therefore must follow strict rules of disclosure. One thing is certain, Warren is privy to inside information and he's using that information—which the public doesn't know—to make investment decisions which could garner him profits that he would otherwise be unable to garner. Yes, I said it. Something really smells about this deal.
I've always said that investing isn't fair. Yes, we have the SEC, but where was the SEC when the Dow Jones dropped 512 points the day before Standard & Poor's downgraded America's credit rating? Martha Stewart was one of the few people who has ever been prosecuted for insider trading, and I gather she was targeted because of who she isn't rather than who she is.
There's some kind of underground rumor mill that the run-of-the-mill American Public is not privy to. I don't know how it works but I know it exists because first the market reacts, and then after the market reacts, the news is finally broadcast. It's always been shenanigans and more shenanigans. You can look at case after case after case of stocks dropping just prior to bad news, or rising prior to good. How does this happen?
Wait, I've gotten off-topic. So, the government spends money to stimulate the economy. Everyone disagrees on how this money should be spent but they all agree it should be spent somehow. We've run up trillions more debt and devalued our currency and what have we gotten? Nothing. It's not working because there is no belief that the economy is going to improve. Across the world countries are failing, banks are failing, economies are failing. Who's going to invest in something that's obviously failing?
If I'm an investor and it appears as though the only one spending money is Uncle Sam, and Uncle Sam is fifteen trillion in debt and still spending like there's no tomorrow, I have to wonder whether there will be a tomorrow. Is this government spending sustainable? Absolutely not. What's going on here? It's like Uncle Sam is a terminal cancer patient completing a few more items on some asinine bucket list.
There is no belief. There is no confidence that anything is going to get better, ever. People are waiting on the sidelines buying gold or anything they think can hold value in these incredibly uncertain times. We are all very uncertain, aren't we? Why would anyone invest billions in such an uncertain time as this? Hey Warren, what have you been told that the rest of us haven't?
Hello SEC, are you there?
52 minutes ago