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Max Keiser: Your 'stimulus' check will cost you more than it's worth
By Max Keiser
Sunday, April 27, 2008
I'll explain two reasons why you Americans should not spend your economic stimulus check: the first applies to people who work regular jobs for wages, the second applies to people who work in investment banks for bonuses.
If you work for wages (or live on a pension), consider this: If every American said "No, thank you" to President Bush's stimulus check and refused to cash them, the value of the dollars in your pocket right now, in terms of their purchasing power would go up by a factor greater than the face value ($600) of the stimulus check. In other words, if you didn't spend these checks, you'd be the richer for it.
The reason being that America does not have a hard-money economy; it's a debt-based fiat currency economy. All the money in circulation in America has been borrowed and then re-lent. So borrowing more money ($168 billion for the stimulus package) and then re-lending it to Americans, as Bush is doing, only increases the debt load and debases the value of the currency outstanding (against a backdrop of stagnant wages and minuscule interest rates for savers).
If an American was planning to spend $40,000 this year on food, clothing, shelter, health, and various other expenses and they were hoping to defray some of that cost thanks to Bush's stimulus check, understand that by simply adding another $168 billion of debt (the cost of the stimulus package) on top of America's current multi-trillion debt load will continue the Bush-Paulson-Benanke trend of debasing the purchasing power of your money and therefore raise the price of goods and services by more than the $600 "gift" (without a commensurate rise in wages or increase in interest paid on savings).
This is why America's debt problems won't go away. Every dollar spent adds debt and spawns more fiat currency issuance, which has the effect of decreasing the purchasing power of the U.S. dollars in your pocket. Bush tries to make up the difference by borrowing even more; borrowing $340 million a day to fund the war and close to $3 billion a day to cover U.S. operating expenses, not to mention Wall Street borrowing more than $30 billion a day to keep its own Ponzi scheme going. All this borrowing keeps alive the vicious financial spiral trending lower towards permanent currency debasement and possible sovereignty loss.
Now if you work in investment banking, the opposite is true. Money supply growth means bigger fees and bonuses. You may lose more than $600 in purchasing power with that $600 stimulus check, but the fees and bonuses you make processing all that debt (read: dollars) is greater still. In other words, the more the government increases the debt load (money supply), the more you make -- even discounting for the lost purchasing power caused by the inflationary impact of higher money supply growth.
But listen, bankers: Resist the temptation to spend your stimulus check even though by doing so you are increasing America's indebtedness and, therefore, your fees and bonuses.
In a year or so, after 99.999% of Americans have cashed their stimulus check, any checks that have not been cashed will accrue value as collector's items.
As such, the value of these checks as uncashed mementos of the failed Bush presidency should appreciate at the inflation rate plus a collector's item premium rate for years to come.
As a matter of fact, an enterprising soul might make a pretty penny by setting up an Internet site to buy people's uncashed stimulus checks at the face value plus a small premium. Five to six years from now you might be able to re-auction and sell these uncashed checks on eBay for double or triple the price you paid to Asian and European collectors buying these up like visitors to the Berlin Wall who bought chunks of concrete left over after the collapse of East Germany.
Max Keiser is an international journalist and radio and television producer, hosting "The Truth About Markets" on ResonanceFM 104.4 in London and covering markets and finance for Al Jazeera's "People & Power" series.
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