Investors Who Ignore The Fear Mongers Will Prosper

| June 7, 2011 | 0 Comments

Last Tuesday, the House of Representatives overwhelmingly refused to raise the limit on how much money the Federal Government can borrow.

What’s more, the Federal Government has already borrowed nearly $1 trillion this fiscal year (since October 1, 2010).  This year’s deficit has pushed the national debt to the current limit of $14.3 trillion!  That’s a big and scary number…

Never one to miss an opportunity, the fear mongers are out in force.

They’re talking about the perils of the Fed’s continuing down their current path of deficit spending.  And they don’t stop there.  They’re also quick to point out Americans growing dependency on the government.

They believe the system is broken and disaster will strike sometime in the next year.

To that prediction I have to say…. Give me a freakin’ break.  Even if they’re right, there’s no way anyone can possibly know when the end of America will come.  Just ask the preacher who predicted the end of the world was coming on May 21, 2011.

Clearly, it didn’t work out too well for him.  We’re all still here.  And it won’t work out for the fear mongers predicting the collapse of America either.

Obviously, making doomsday predictions is a fool’s game.

It’s just too bad there are so many pessimistic fools who get taken in by this type fear mongering.  They’re so paralyzed by fear they simply want to survive.

We’ve got a better solution.  You don’t have to merely survive on the gold and silver you have stashed away.  You can prosper!

I’ll tell you how in a minute.  But first, let me explain why.

The rising national debt and budget deficits aren’t even close to the biggest thing to be afraid of.  In fact, they’re normal at this point in the recovery from the 2008 credit crisis.

I don’t have enough space to go into all of the details here.  But suffice it to say, the Great Recession was different than other recessions.

The most common type of recession is caused by a slowdown in the business cycle.  It is the trough of the business cycle that ends with economic contraction.

But the Great Recession was different.  It resulted from something in the financial system breaking.  Almost overnight, it caused a drastic shift in the way the global economy operated.

In short, recessions caused by the system breaking down are much more difficult to recover from.  In fact, the last time we had a recession caused by the system breaking down was the Great Depression!

I believe one thing that separated the Great Recession from the Great Depression was the Federal Government’s willingness to spend more money than they collected.

More importantly, bringing these deficit spending programs to an end too soon will cause the economy to fall back into recession.

Here’s the bottom line…

Increased social spending is driving the current deficits.  But the food stamps, unemployment benefits, and tax cuts are preventing much greater social ills than a rising national debt is causing.

Do we really want to see breadlines and shanty towns springing up across the country?

Clearly, we don’t want people to be dependent on the Federal Government forever.  But in the short-term, it’s better than letting the economy fall into a depression.

Right now is not the time for spending cuts and a balanced budget.  Our economy is still too fragile.  We need to continue the deficit spending until the economic recovery gets stronger.

The key to reducing our national debt lies in the future.  But not until the economy is healthy enough.  That time will come when the housing market finally stabilizes.  But until then, we need the stimulus to keep us from falling back into recession.

As unappealing as this situation is, it’s not the end of the world.

Eventually, the economy will work through the imbalances the housing and credit bubbles caused.  But right now, we need fiscal and monetary stimulus to boost the economic recovery.

And despite all of the rhetoric, the Fed and the government will provide that stimulus.

What does that mean for you?

Don’t listen to the fear mongers.  Stay invested.  And buy the dips.

Sure you could survive by hiding in your basement with piles of gold and silver.  But in the long run, buying quality stocks at a reasonable price will lead to prosperity.

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Category: Stocks

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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