Why Economic Stimuli Are Not Working

President Barack Obama, preparing to announce his big new economic fix, appointed labor specialist Alan Krueger on Monday as chairman of his Council of Economic Advisers. Need more jobs? Hire a labor expert, of course.

Obama and Krueger will not think beyond the paradigm of government stimulus. It worked for Obama's predecessors, so why not now? Even if it creates problems for future generations, tossing money at the economy should create an economic bubble and an election-year illusion of prosperity.

It doesn't work anymore, and Harry Dent — an economic analyst with an MBA from Harvard — may know why.

Dent predicted with precision the economic downfalls of Japan and the United States. Unlike most prognosticators, Dent combines economic and demographic data. Money and wealth mean nothing in the absence of human activity. Economies grow when thriving populations produce and trade; they contract when populations age and spend less.

"In a modern and industrialized economy, as we age we go through very predictable spending stages of life that occur at predictable ages," Dent explains on his website, http://www.hsdent.com. History tells us that humans hit their peak spending between the ages of 46 and 50. As the majority of baby boomers moved toward their peak spending ages, Dent continually and accurately assured investors of bull markets and economic growth. He also predicted, almost to the month, when we would begin our long and devastating recession, because he knew exactly when boomers would begin spending less and downsizing their homes.

"Our spending continues to increase until about age 47 as our kids reach their late teenage years and are still living in the household," Dent explains on his website.

"As we reach 50 and the kids leave home, we begin to spend less."

When does the recession end? Not for another 10 to 11 years, as members of the 1990s "baby boomlet" generation, aka Generation Z, begin their earning years.

In an interview with Dent, investment blogger Brett Owens asked why Keynesian stimuli by Presidents George W. Bush and Obama have not worked. He came away with this:

"During previous recessions, the government could float easy money out into the economy, and eager consumers would grab it and spend it — because they were in the upswings in their spending patterns," Owens wrote. "But this time, (they) are merely pushing on a proverbial string. The Fed can extend credit, but they can't force the consumer to take it! ... It's a time to save, not spend, in their lives. Want a mortgage at record low rates? No thanks — we're already choking on debt! And we hope to retire someday."

If our country's economy is to grow reliably, Obama and other politicians should focus on demographics as much as monetarism. That means getting serious about immigration reforms and policies to incentivize American fertility. Our economy isn't built on currency. It is built on humans producing and consuming in ways that ever improve the human condition. Economic growth is human progress; contraction is human regression.

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