Salter: National economy policy and liberty
Many Americans think that it is the job of the government to fight recessions. Don't let them. Politicians and bureaucrats aren't very good at
keeping markets stable. Most of the time, their advice hurts more than it helps. According to economics textbooks, the business cycle can be smoothed out in two ways
. The first is the budget. Congress and the president can give the economy a boost by increasing spending. The second is the way money is handled
Our country's central bank, the Federal Reserve, can meet high demand for cash by printing new money.
What the books don't say, but should, is that the first one rarely works and the second one only works in very specific situations.
Let's start with how money is spent. For government spending to wake up the economy, aggregate demand must go up
(total spending on goods and services). But if Uncle Sam spends more, it usually means that someone else has to spend less