"Ayyyyyyy!"
Posted on 07/31/2009 7:55:17 PM PDT by sickoflibs
Have you heard the great news? The recession is over! It’s true; I saw it on TV. Why fret about growing unemployment lines when banks are paying big-time bonuses again?
Proof of the turn was apparently revealed by the 2nd quarter GDP figures that showed that the economy declined by only 1%. After four consecutive quarters of negative GDP, the green shoots now assume that growth will resume over the summer. But before we pop the corks, it may be worthwhile to ask, “what really has changed, and what is responsible for our new lease on life?”
In truth, because of the continued profligacy of the government and Federal Reserve, the imbalances that caused the current recession have actually worsened. We are now in an even deeper hole than when the crisis began. Rather than wrapping up a recession, we are actually sinking into a depression. If things look better now, it’s just because we are in the eye of the storm.
We must remember that recessions inevitably follow periods of artificial growth. During these booms, malinvestments are made which ultimately must be liquidated during the ensuing busts. In short, mistakes made during booms are corrected during busts – and in the recent boom we made some real whoppers. We borrowed and spent too much money, bought goods we couldn’t afford, built houses we couldn’t carry, and developed a service sector economy completely dependent on consumer credit and rising asset prices. All the while, we allowed our industrial base to crumble and our infrastructure to decay.
In order to lay the foundation for real and lasting recovery, market forces must be allowed to repair the damage. However, current policy is counterproductive to this end. Trillions in stimulus dollars have kept the party going, but now what? How does deficit spending by the government address the problems that brought about the crash? It doesn’t; it just delays and worsens the hangover – and we have to hope we don’t die of alcohol poisoning.
By interfering with the unpleasant forces of the recession, we simply trade short-term gain for long-term pain. By propping up inefficient companies that should fail, we deprive more effective companies of the capital they need to grow. By holding up over-valued asset prices, we prevent the prudent or less well-off from snatching them up and, in doing so, creating a new price equilibrium based upon reality. By maintaining artificially low interest rates, we discourage the very savings that are so critical to capital formation and future economic growth. In addition, the false economic signals the Fed sends the market prevent a more efficient re-allocation of resources from taking place and leads to even more bad economic decision being made. By running such huge deficits, we further crowd-out private enterprise by making it harder for businesses to invest or hire.
The recently passed “cash for clunkers” program (currently on-hold, as it ran out of funding in one week) is a perfect example of how government policy can make the economy worse. By incentivizing Americans to destroy fully paid-for cars so they can go deeper into debt buying brand new ones, the government weakens an already crippled economy. The last thing we want to do is subsidize Americans to go deeper into debt by buying more stuff. Don’t they realize that is precisely the behavior that got us into this mess?
Think about it this way. If your friend were in trouble because he had too much debt, would you encourage him to take on even more? Wouldn’t a real sign of progress be a reduction of debt, even if he had to cut back on his everyday expenses? What is true for an individual is also true for a collection of individuals, even if they call themselves a ‘government.’ If, as a country, we are even deeper into debt now than we were before, we are worse off. Period. The fact that the additional debt enabled better short-term GDP numbers is a long-term negative.
Since we have learned nothing from past mistakes, we are condemned to repeat them. As if we have not already suffered enough as a consequence of the Bush/Greenspan stimulus, Obama/Bernanke are giving ever larger doses, which will prove lethal to any recovery. The recession is over; long live the depression!
If you realize both parties in Washington think our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
You can read past posts by clicking on : schifflist , I try to tag all relevant threads with the keyword : schifflist.
Ping list pinged by sickoflibs.
To join the ping list: FReepmail sickoflibs with the subject line add Schifflist.
(Stop getting pings by sending the subject line drop Schifflist.)
Yep , we cured the recession with debt and a small increase in the GDP, the debt based part. That should go far.
I think he is addressing JasonC. Didnt JC predict the recession would end in April? We had to wait a few more months to get to the current happy times.
Imagine if official unemployment was >10 % under GWB and GWB said the recession was over, all hell would break loose, “Oh the pain”
“Who ya gonna believe? Me? Or your lyin’ eyes?”
Here is Karl Denninger’s excellent analysis of what these GDP numbers really mean (and the lies behind the propaganda):
http://market-ticker.denninger.net/archives/1280-GDP-In-Pictures-The-Truth.html
http://market-ticker.denninger.net/archives/1278-Uh-Oh....-GDP-Interpretation.html
http://market-ticker.denninger.net/archives/1276-GDP-Uuuuggghhhh-UPDATED.html
As Karl often says, the math doesn’t lie.
We're going to have to pay the piper...
Thanks for the ping, sickoflibs.
ping
I don’t object to objective analysis, but the problem is if dire predictions do not come true (which I hope they don’t) 0bama can use this against us.
Not going to make it, first day of fall September 22, 2009 at 5:18 pm EDT.,
LOL
Thanks for the links to Denninger to dovetail this very good article by Schiff. BTTT!
Schiff is a melodramatic, but he’s right. Denninger is dead on.
Obama has a similar plan as GWB, Buy as much time as you can with debt(getting as much stuff you want through as possible ) , and hope you can hold off the disaster till the next guy. Its called democracy
Pay close attention to who is saying the recession is “over”. These are the same people who were saying we were in a recession while the market was going up under GWBush. The media is a wholly owned subsidary of the marxist party. I refuse to call the democrats, democrats and I refuse to accept that b h ozero is the legal president.
I may be mistaken but I believe it was a smaller decrease in GDB....
That following a huge downward adjustment of the GDP for last quarter...
BFL
"Ayyyyyyy!"
I haven’t read your posts lately. Welcome back.
Thanks...don’t post much, glad that you find a little value in some of my comments...
Congressman Ron Paul describes the American power structure. As a member of the House Banking and Currency Committee, Paul was in a unique position to see the inner workings of economic power and control of the country, and how this power translates into political power.
Paul describes how, through the control of the Federal Reserve and the banking system, the American power elite is basically out of reach of the democratic system. Concurrently, by using such organizations as the Trilateral Commission and the Council on Foreign Relations, control over the political process is maintained, resulting in what is in reality a in the U.S.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.