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Friday, February 12, 2010

There's No Demand Shortage

When the government spends too much borrowed money to juice consumer demand, that's bad in nearly all circumstances, but when a government spends too much borrowed money to juice consumer demand inside a nation that has had its productive capacity transplanted overseas, that's especially bad.

The trade deficit is proof that we have inadequate production to satisfy native demand. If the government is going to spend borrowed money on anything, it should dedicate 100% of the spending towards rebuilding US manufacturing. You don't rebuild an economy by burying the citizens deeper in debt so they can go buy more at Wal Marts full of imported goods. Build manufacturing, add tariffs to foreign goods, get people working, and spending will take care of itself.

Borrowing to fuel demand in a country with our trade deficit is just dumb. It only makes sense to people who still believe globalization is good for America.

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