Goods Spending Vs. Unemployment

When goods spending falls, the unemployment rate rises.

Another $3 Trillion in Spending

There is no end to spending. Debt, money supply and balance sheet expansion will continue.

 

Deficits are going to get worse.

The Effect of Government on the Economy of a Country

I believe government is an important institution to keep order in a society of a country. It should focus mainly on the country's defense and should obey the constitution of the country. By no means it should involve with the economy of a country as the government is always less efficient as free market capitalism. Governments should be as small as possible, in order to let the private economy flourish. Today, governments are standing in the way of free market capitalism through taxation, regulations and counterproductive measures. What governments don't know are the unintended consequences they cause. I'm sure that governments are the root cause of all the problems in Europe and soon in the United States.

In this article I want to give an overview of several countries and their government involvement. The best measure to rate government involvement would be the amount of spending as a percentage of the country's GDP. We will discuss the effects of a big government on the country's economy and give advice to investors on how to act on this knowledge. We will see that there is a direct correlation between government size and unemployment/debt/tax rate.

To read the article go to: The size of governments and the effect on their economies.

Analysis of Deficits to Outlay Spending Ratio

I already talked about how the U.S. budget deficit is skyrocketing in this article. Reason was that outlay spending has outpaced government tax revenues since 2008.

I decided to make another chart of this going to the early 1980's. As James Turk stated, when governments start to borrow more than 40% to fund their outlay spending, then we have come to a hyperinflationary scenario.

To see what this chart means, go to: the full version of this article.

Chart 1: Deficits (+)/Surplus (-) versus Outlay Spending Ratio

The road to hyperinflation

Today president Obama disclosed the projected US budget deficit for 2012.

The projected deficit would reach $US 1.33 trillion in fiscal year 2012. While in December 2011 the trade deficit widened to $US 48.8 billion. For full year 2011 the deficit was $US 1.3 trillion.

Here's what the government forecasted previously (Chart 1). They forecasted a smaller deficit in 2012 of only $US 1.1 trillion. Clearly they got it entirely wrong because the deficit in 2012 is projected to be larger than 2011, namely $US 1.33 trillion. To see what this means go to: The road to hyperinflation.