Government taking over the economy will lower productivity dramatically. Berries (bureaucrats) don’t seem to understand this. It takes more and more government spending to marginally grow GDP; thus the huge sums being “spent” to merely slow down the decline. We are fast reaching the point, because of immense debt levels that take capital away from productive uses (crowding out), where infinite spending by government is not adding to GDP.

All this massive spending has “stabilized” the economy and with some natural and base level of economy, people have perceived this to be the beginning of improvement. This is flawed logic. Getting worse at a declining rate is natural.

Some are buying stocks because they fear inflation. Inflation is a falling dollar. When the dollar falls it tends to drive prices up. But we can see that prices of necessities are going up while prices of discretionary things are going down. This is natural as disposable income falls and the savings rate rises.

Additionally, I think they don't quite understand how "inflation" is created. To "inflate" or devalue the dollar precipitously, you need a fractional banking system to lend money and consumers to borrow it. Without that you have no multiplier effect.

With mortgage rates up 100 basis points in 2 weeks (as a result of trying desperately to print enough money to reflate), and with a now required 20% down, few people can afford a mortgage given their negative equity and high debt. The money "supply" is egregious (the government bailing out banks and stuffing them with cash), but the velocity of money has come to a standstill (people aren't in any shape to borrow it).

I heard a Fed official say that a jobless recovery is possible. I suppose it is, but I will tell you it can only occur if productivity is rising. So while not lying, he isn't telling the truth, or he doesn’t understand it. Berries call productivity higher when it is driven by leverage.

For example, a company can make more money per employee if they lever their balance sheet, at least temporarily. But leverage creates risk -- or haven’t we learned that lesson yet? Real productivity is driven by technology and system advancement, not by more leverage. That may or may not come but it is not a function of leverage and government spending, which in fact tends to reduce, not increase it.

The US economy has a serious problem, one which I've talked about many times: too much debt. The government is merely trying to shift financial debt (forget consumer debt) to public debt. They're merely shifting the costs from us to our children. Today’s politician seeks short-term solutions at the expense of the long term.

Shouldn’t it be the other way around?

Risk is very high.