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Chapter 23 Reflection

I was glad to learn more about how interest rates affect the overall economy, as well as the cues that coincide with decisions to manipulate the interest rate.

I’m most interested in the arguments regarding government funded projects as well as a balanced government budget.

On the one hand, I can see how money can trickle down from the government to the people when public projects are implemented. Construction jobs are sustained when bridges need to be built. However, it should be noted that this does not necessarily affect the job security within the industry itself. It’s great if businesses can win contracts, but what actually happens when the project is finished? How much has it actually changed the community itself, or has it just lined the pockets of a few? Also, how does the government decide which projects are most necessary? And in order to fund it, aren’t they raising taxes overall? It seems that when governments attempt to somehow increase public welfare by increasing their spending, all it really amounts to is them taking money away from the people in order to give it back in a different form. I think the people themselves usually have a better idea for how that money could be spent to get them closer to their dreams.

The idea of a balanced government budget and the budget deficit go hand-in-hand. The deficit continues to exist because we have to keep borrowing money in order to cover the nation’s interest payments on money it borrowed in the first place. It is a snowball effect of massive proportions, and all the politicians keep kicking the can down the road. If we are serious about paying down the debt, then the government has to save more than it spends, which means that certain programs and/or positions will have to be cut. And of course, none of the special interests want to be the ones that are ousted. I’m also skeptical of the relationship that the government has with the Fed. The Fed enjoys our interest payments much more than it would enjoy having the accounts settled. It isn’t just a matter of being paid back...all these powerful players enjoy being in control of other people’s lives through ‘managing’ the economy in our ‘best interest’. While they may have control of the financial capital, local communities are better equipped with relational capital as well as the creativity to put resources to better use. 

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