The “war on poverty” has been a miserable failure, in spite of the trillions of taxpayer dollars spent over the last 4 decades. The “war on drugs” is another expensive failure on all fronts. Central planning in American education has resulted in a very expensive system that is failing our children. Ask any supporter of the welfare state, however, and the ongoing failures of government programs result only from not throwing enough money at them. It doesn’t matter what miserable results from whichever government program, the only proposed solution to the problems is more money stolen from taxpayers.

In the real world, if a private business or association is not successful, it either changes the way it does business and serves people or it takes a one way trip to the business graveyard. Bankruptcy and failure ensure that bad ideas or inefficient, unproductive systems don’t keep sapping life from the productive sectors of society. That is the way that society progresses and economies advance.

Not so with government. It seems that the bigger the failure, the more support it gets. We have been victims of expensive stimulus plans for some time now. Remember the cure-all about a year ago? If only the wise politicians could take enough money from taxpayers to redistribute to taxpayers, they could jump-start the economy. Not enough. More billions prop up banks and failing businesses. Between the Federal Reserve Bank, FDIC and the multiple stimulus spending plans, the toll is now in the multiple trillions of dollars.

With all of the smart people purportedly hanging out in Washington DC, you would think that they might realize that, if you take a dollar from Joe and give it to Frank, and a dollar from Frank and give it to Joe, you really haven’t stimulated either. Worse yet, if you take a two dollars from Frank, give one to Joe and keep one to feed the beast, you have actually de-stimulated and made the whole economy less productive.

Stimulation is the fundamental reason that this country and the world are in their present sad state of affairs. Central banks try to stimulate economic performance at the beginning of an economic boom by pumping counterfeit money into the economy and lowering interest rates below the market rates. That stimulation only distorts the real economic incentives. The inflation devalues the dollar and creates bubble economies, where certain sectors inflate at a quick pace, giving the illusion of rapid real growth. In the present case, artificially low interest, specific homeowner incentives, government subsidized mortgages and ownership programs, and requirements for banks to offer loans to risky borrowers combined for the deadly combination that exploded into the current meltdown.

Those same smart people in our nation’s capital choose to ignore the obvious, and instead, throw trillions of dollars of good money after bad. Instead of fixing the core problem, they play political games for fun and profit. It is hard to believe that hundreds of the most well connected and powerful people in the country can be so willfully ignorant. That is, hopefully, the case, however, because if it isn’t, it means that, instead, they are willfully malicious. They consciously hurt the people they pretend to help.

Audacity, in the positive sense, means boldness or daring. It is a characteristic of effective leaders.

There is, on the other hand, an old saw among seasoned airplane pilots: “There are old pilots and there are bold pilots, but there are no old bold pilots.” Audacity is sometimes the precursor to disaster, because it substitutes cockiness for clear thinking, and throws caution to the wind. In this time of crisis, our leaders have thrown caution to the wind. They are flailing in the dark so they can say they are doing something. They are prescribing poison as the antidote for poison. They don’t think about the ramifications and, instead, rely on knee jerk reactions, which will ultimately multiply the problems they themselves have created.

Wouldn’t it be refreshing if our politicians would have the audacity to actually think for a change?

Our current stimulus plan is one massive transfer from Peter to Paul. The American Recovery and Reinvestment Act of 2009 is an amazing document. It is 258 pages of funding opportunities, grants and programs totaling $825 billion, in addition to all of the previous and parallel efforts by the Treasury, Fed and FDIC. It sounds like trick or treat time. A billion for you, a few billion to you, and here, here’s an extra three and a quarter billion for you. That’s mere pocket change when everyone is thinking in terms of trillions now. However, if you own a casino or gaming organization, a swimming pool, aquarium, zoo or golf course, forget it. You’re not eligible. You have to find a different sugar daddy. All other comers are welcome.

Where is Peter in all of this? Look in the mirror. If you are a taxpayer, or if you use money, the value of which will be inflated away, or if you have children or grandchildren who will be footing the bill in the future, then say hi to Peter. You are him.

The stimulus plan injects mountains of previously non-existent cash into the economy, money that is made from nothing. The idea is that, if you use enough money to “prime the pump”, the economy will start working on its own. The problem is that the government has been priming the pump for decades. The booms and busts are the result of constant priming.

The underlying assumption behind the pump priming and the stimulation is that there is not enough demand for goods. Our fearless leaders want to stimulate us to buy, even though we were being condemned for consumerism when it was convenient for them. If our government really wants to stimulate our economy to the maximum amount, I have the foolproof solution.

I propose that the government buy printing presses with official currency plates for every family in this country, the bigger the denominations the better. That way, we, as consumers, wouldn’t have to wait for the banks to get stimulated in their own good time. We wouldn’t have to wait for dinosaur car companies to have a miracle rebirth. We each could stimulate our own economy.

Let’s say that printing presses would cost $10,000 each. If we use a nice round number of 100 million family units in America, it would take a measly $1 trillion to forever solve the problem of not having enough demand. Politicians could save all of the trillions of dollars of stimulus wasted by pouring them down the black hole they’re trying to fill now.

People could print money for everything their heart desired. They could dine at five star restaurants, drive luxury vehicles, live in huge mansions. They would be able to support a level of demand reserved now only for politicians, bankers, mega corporate execs, lobbyists, United Nations representatives and environmentalists.

It is obviously preposterous to believe that everybody making their own money would stimulate the economy. Nothing is produced by counterfeiting except dollar bills. There is no productivity, no real wealth creation. All that would result is a vast increase in worthless dollars. In that case, the winner in the economy would be the one who could counterfeit the most, the one who inflates the money supply and devalues the dollar the most. The losers are the ones who don’t counterfeit, or counterfeit the least.

The reason that it is preposterous to believe that the stimulus will work when private citizens do it is precisely the same reason that it is preposterous for government to do it.

The false stimulation may give some people profits, but those profits will come from the loss of purchasing power of the buying and tax paying public, not from the wealth creation process of free markets. It is inevitable that there will be a large number of “stimulus multi-millionaires”, those who most efficiently rape the system and the taxpayer.

The problem for investors these days will not be finding what industry or what business will be most productive, but rather, who will win the stimulation game. Good luck, Peter, you’re going to need it.

Imagine that you had a printing press in your basement. Whenever you needed to pay that $40,000 college bill, you could just print a bunch of hundreds dollar bills and send them along to the college. When you had to pay the $150 grocery tab, just go downstairs and spin off a few more dollars. Also, imagine that everyone was required to accept your money as payment. There would be no need to do anything productive. Your work could be printing up new dollar bills. Think of how wealthy you could be.

Now suppose your neighbor also had a printing press in his basement and everyone was required to accept his bills for payment. He also has college costs and teenagers with big appetites and pressing needs, like X-box 360’s. It would be nice for him if he could also go to the basement to get whatever money he needed.

Going further, imagine that everyone in the country had their own printing presses. Think of how wealthy and prosperous everyone would be. They would be able to afford anything because they could just print money as they needed it. Poverty would be ended because even the poor could print money to pay for anything their hearts desired.

The absurdity of this scenario should be pretty obvious. If everyone just printed money without producing any value to back it up, there would quickly be so much money in circulation that it would take wheelbarrows full of money to buy a loaf of bread, just as it did in Weimar Germany. Money made out of thin air has no real value and dilutes the buying power of money already in circulation. That is why it is illegal to make counterfeit money. You would be cheating whoever you pay because you are getting value and giving no real value in return.

Consider now the modern, legal method of making money. The Federal Reserve Bank and fractional reserve banks are the only legal source. Consider, now, where the Fed gets it’s dollars. Instead of making new money out of thin air in the basements of millions of homes, it makes it out of thin air in a nice, convenient, centralized location. Under the current system, there is no need to have any value backing up the dollars. However, everyone in this country is required to take the counterfeit money as legal payment.

As with the basement printing presses, the government printing presses allow their owners to buy things without giving anything of value in return. The official process is much more complex, with a host of intermediaries, but the overall concept is simple, and just as destructive.

Government can only spend money it raises in taxes, what it incurs in debt or what it makes out of thin air. Taxation is the most obvious and is under scrutiny by taxpayers. Politicians have to be careful with using taxation. Overuse can get them un-elected.

The second method is transferring the obligation to pay to future generations. By borrowing the money, the government can buy things on credit. Like people who overuse their credit cards, at some point in time the lenders are going to realize that the ability to pay is exceeded, and shut them off. Eventually, someone will have to pay the price, but, lately, that doesn’t seem to bother the folks in charge.

The last method is the silent tax. Making money out of thin air to pay bills is nearly invisible to most people. Expanding the money supply is the only way that a general inflation can occur, but our crafty central bankers have persuaded people to believe that inflation comes from those bad oil producing countries or greedy business people raising prices or hurricanes or frosts. As more valueless dollars are pumped in, the existing dollars are worth less, and prices of goods and services move ever higher. This process is the reason that the dollar has been decreasing in value by over 30% per decade.

Through this process, everyone loses, except those close to the central banking system. The government and financial insiders gain at everyone else’s expense. The poor are hurt most by the inflation tax. Maybe that was the exploitation that Karl Marx mistook for genuine free markets and capitalism.

Counterfeit money does have some value, however. It can teach us some valuable lessons about the ethics of centralized government. The lessons aren’t pretty.