OK, now I understand the point of view that has brought this spending upon us. However, wouldn't this expansion of government eventually cause our demise?
Eventually, the spending doesn't happen in such massive quantities (in theory). Now, in practice, it's much harder to stop.
This is only making me feel worse. This is like a cart running down a street in San Francisco. It won't stop till it has hit rock bottom.
The hope is that the massive cash being injected right now by the government will spark an increase in private investment back to former levels, allowing the government to reduce its spending.
Condensing the crisis and economic theory, simply:
1. The crisis has caused a credit-freeze, reducing the amount of money people can spend in the system.
2. Lack of money has led people to save more and spend less, meaning less consumption and private investment.
3. Falling investment has a dramatic effect on the GDP, even greater than actual fall in investment.
So how do we fix that dramatic decline? Luckily, an increase in government investment (read: spending) has the same effect as private investment. So an increase in G leads to a greater increase in GDP. As GDP rises and the market emerges from the crisis the credit will unfreeze, consumption and private investment will increase and we can decrease government spending.
