As economic activity is increasingly orchestrated by politicians and central-bankers, it is important to understand their prevailing economic philosophies. Washington imbibes on an unhealthy concoction of two parts Keynes and one part Monetarism favoring consumption over production, borrowing over saving and ignoring scarcity.

Borrowing and consuming do not prosper us. Wealth is created through production and increased through saving. When we produce a surplus we can trade with other producers to gain that which we are unable to produce ourselves. By saving some of our surplus in the form of capital, we can thus expand our ability to produce and thus our ability to generate additional wealth. Our ability to hire additional labor, build new plants or acquire better tools is a function of our capital. Consuming everything prevents the accumulation of wealth and the capital necessary to create it. Consuming without producing depletes capital. Even our ability to borrow is a function of our current production and our accumulated stores of capital.

Recessions involve the destruction of capital. As the real estate bubble popped and the market crashed, our capital decreased. We now produce less and thus should be consuming less. Scarcity has been aggravated, but demand remains infinite. The opportunities to produce remain. The availability to consume has lowered, but all of Washington's policies assume the problem is too little spending. Low interest rates and accelerating inflation thwart savings and encourage further debt encumbrance. When we try to save anyway, they borrow in taxpayers' names.

The economic policies emanating from Washington stimulate consumption, subsidize borrowing, thwart production, and punish saving. Consumption requires no stimulation. We are an inherently selfish lot. Our government-centric economy stimulates that which requires no stimulation and impedes that which does. We take from our best producers through progressive taxation to enable non-producers to keep consuming. This undercuts any incentive among the indolent to become productive. Washington punishes those growing the pie and rewards those who only partake. The Nanny-State mistakes human nature.

Humans are fallen and thus incentives matter. Throwing money at people alters their behavior dramatically and usually for the worse. Each of us acting in our own selfish interest reacts perversely when politicians distort reality by imposing negative motivations. Their safety nets enable irresponsible behaviors and their social spending rewards unproductive behaviors. Paying people so they can continue consuming without the need to produce thwarts production and wastes scarce resources.

These redistribution programs fail because they assume both producers and consumers will continue producing at the same levels post transfer. History and human nature prove otherwise. The productive lose their motivation to keep producing and the unproductive lose the necessity to start producing. If we give funds to non-producers so they will spend thus stimulating those who do produce, why not leave these funds with producers via tax cuts? One way encourages idleness. The other way rewards production.

Allowing the productive to keep the fruits of their labors fosters additional production. Undercutting the growth of the industrious, the responsible and the enterprising via progressive income taxes to reward the stupid, lazy and irresponsible via bailouts or entitlements is economic suicide. All of the above repels capital investment.

Washington shifts the blame to banks for extending the crisis by lending too little. The fact our society is already far too levered seems forgotten. There can be no credit without capital. Capital is finite, but it isn't static. If we want more debt, we need more capital.

We can inflate more dollars, but we cannot create capital except through innovations, profitable enterprise and saving. Unlike consumption which happens automatically, each of these requires incentives. I work for pay. I save for a return, but consuming is pleasurable in its own right.

Washington's misguided incentives scare foreign investment away and make domestic capital go into hiding. Pending anti-business legislation like health reform, cap and trade, employee free choice act, increased regulatory oversight, and a pending massive tax increase repel foreign investment. Neither do they incentivize Americans to risk their capital on business ventures that promise lower returns even as Washington threatens to confiscate more of the returns they do generate. Investors with capital sit on the sidelines or spend on frivolity.

Meanwhile Washington devours record amounts of what capital remains to fund its waste, patronage and vote-buying schemes bundled under the pretense of stimuli. Everything it spends it must either borrow, print new money or tax. Borrowing and taxing both deprive said capital from the private actors politicians love to tell us they are helping. Low interest rates incent banks to borrow for nothing from the Fed and then buy treasuries for a locked in return. Washington's debt crowds out the loans they claim to encourage.

Inflation is probably the most heinous economic retardant of all. Every economic transaction is one's goods for another's. Money is simply the medium of exchange facilitating the necessary arrangements incident to commerce. Washington's primary constitutional role in the economy is ensuring honest weights and measures. The dollar represents the fundamental measurement of virtually all our economic transactions. It is incomprehensible that they deliberately debase our currency to cheapen their debts and silently confiscate our wealth. Even worse, they pervert the scale.

In a market driven economy, we trade because we expect to benefit. We exchange our money for an item we value more. The store wants the money more than the merchandise. What Adam Smith termed "mutual consent and to mutual advantage." We invest for the same expectation of benefit according to our time preference. But this only works if the scales are honest offering both parties confidence to transact. Destroying the value of the dollar upends the scale making us hesitant to trade or invest.

Instead, inflation hedges like gold devour much of the capital that could otherwise be invested into companies that create jobs and generate the products that enrich our lives. The dollar plummeting against other currencies and international commodities bodes ill for our economic future. Why would holders of Euros, Pounds, Yen or anything else want to buy dollars to invest in America? They aren't as evidenced by the dollar's decline.

To paraphrase Bill Clinton, "It's about capital, stupid!"