Can President Obama’s Policies Heal the US Economy? - Frank Shostak - Mises Institute

Can President Obama’s Policies Heal the US Economy? - Frank Shostak - Mises Institute: "[Obama:]

The first step was to fight a severe shortage of demand in the economy. The Federal Reserve did this by dramatically lowering interest rates last year in order to boost investment. And my administration and Congress boosted demand by passing the largest recovery plan in our nation's history.

There is, however, no such thing as a shortage of demand. In fact, individuals' demand is unlimited. What is scarce is not demand but rather individuals' ability to fund the demand.
For instance, an individual might have a demand for a Mercedes 600, but only have the funding for a bicycle.
In order to be able to fund a Mercedes, our individual must produce enough goods to enable him to secure the car.
A dramatic lowering of interest rates and massive government spending cannot improve the bottom line of the economy (the individual's ability to produce more and better-quality goods). Such policies can only redistribute real wealth from wealth producers to wealth consumers."

"there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens' spending and investment to the full extent of its quantity."

"The US president is of the view that somehow he could make the banks lend regardless of real savings. The only expansion of lending that the president could enforce upon banks is lending "out of thin air." This type of lending amounts to the creation of money "out of thin air" — the key factor behind the present economic crisis."