The reason for this is that all production, including any new and additional production called into being by stimulus packages, itself entails consumption. And this consumption tends at the very least to approximate the fresh production and, indeed, is capable of equaling or even exceeding it.
"By far the biggest fallacy is the belief that a growing economy requires a growing money supply."
Guido Hülsmann offers his conclusions: the current monetary institutions (central banks, paper money, and fractional-reserve banking) cannot be justified and should be abolished; such an act should be greeted as a restoration of monetary sanity and a humane economy.
"If buying stuff is the way to promote recovery, then nobody can top the DC politicians."
The present crisis is not a crisis of capitalism but a crisis of state interventionism, and it is also a consequence of a mechanicist approach to economic problems.
Only two things can save the Fed at this point. One is a bailout by the federal government. This recapitalization could be financed by taxes or by monetizing government debt in another blow to the value of the currency.
President Franklin D. Roosevelt's 1934 Gold Reserve Act was the greatest theft of wealth I'm aware of in American history:
"The government doesn't create any real wealth, so how can an increase in government outlays revive the economy?"
Sponsored by the Mises Institute and held in Houston, Texas; September 22-23, 1995.
