Will the economy recover and what will it look like if it does?

Jun

2009

Written by Jesse W Kline

The American Thinker has an interesting article that questions whether or not the U.S. economy will ever recover from the current recession:

Haven't they heard? The America that always recovers is not in anymore. Any assumption of a recovery fails to consider the idea that we now have a government run by people who ignore American history and who are hell bent on changing America's future.

Obama has done more than apologize for America's greatness and generosity while abroad. He is wreaking havoc on the economy that paid for that greatness and generosity at home. Don't you remember? He is "the one" we've been waiting for to finally do something right around here.

Thus the conviction that Americans always bounce back and bring their economy with them is not necessarily relevant anymore. The rules for business have changed and continue to do so daily. Incentive has been devastated. The reliable motivations of the past do not matter, because most of those dynamics have been targeted as what is wrong with this country and they are systematically being removed at a stunning pace.

In reaction, Atlas is shrugging. And who can blame him (and her).

We cannot be on the verge of any meaningful recovery because we are in a downward swirl of liberal policy consequences -- and we have a government determined to correct this by getting more and more liberal.

Likewise, a recent report from Sprott Asset Management looks at the question of who is going to buy the massive amount of new debt the American government is creating and comes up with some troubling conclusions:

As we hope the breakdown above has revealed, the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government - and it appears that current holders of debt are beginning to sell. Because it is impossible to balance the budget from outside sources of capital, the only source of funds left for the US, in all reality, is continued money printing.

The Federal Reserve's policy of Quantitative Easing is failing. The US budget is ludicrous, spending is out of control, spending promises are out of control, the world knows it - and we know it. For all the pundits who see the economy improving over the next year, we invite you to explain to us how this debt crisis will resolve itself without significant turmoil. We've tabulated the numbers above - and they do not lie. As we wrote this past January, welcome to 2009.

While these are troubling signs, I think there's little doubt the American economy will bounce back eventually. As just about any economist will tell you, the business cycle is cyclical, rising and falling every ten years or so. This is one reason why I was surprised by all the fear mongering talk of "the next great depression" when the recession first hit. The bigger question is what the economy will look like when this is all said and done.

I think that a lot of the fear, uncertainty, and doubt (FUD) about the economy was largely created by the media. The tangible effect of this fear was a global recession and a willingness on the part of world governments—including Canada's Conservative government—to implement Keynesian economic policies. Despite the fact that Keynes claimed he was trying to save capitalism, I would argue he's actually a socialist, as is anyone who is now trying to blame the recession on a failure of the capitalist system. The argument might hold some weight if we had a capitalist system to begin with.

The legacy of this worldwide shift to the left will likely be an economic system that bears little resemblance to capitalism. Capitalism is the most efficient economic system known to man. Granted, it is not always fair, but life in general is not fair either. The role of government should be to help people deal with economic shifts, rather than try to ensure they don't happen in the first place. Capitalism achieves its efficiency by weeding out inefficient companies and industries and shifting resources to more efficient sectors. In this respect, recessions are not only expected, they are necessary.

Capitalism operates in the same manner as evolution, the dodo birds go extinct, while humans thrive and conquer the Earth. By trying to bailout inefficient industries through government intervention, we are managing the economy as though it were communist. This, history has shown, does not work. Now that Bush and Obama have spent trillions bailing out the banks, is there any reason to expect they won't make the same stupid mistakes again? None whatsoever. This is like giving a dog a bone every time it pees on the carpet. How can you expect it not to repeat the same bad behaviour, when it actually has a disincentive to do so?

Likewise, when North American governments bailed out the auto sector, they ensured that land, labour, and capital would continue to be tied up in an inefficient and uncompetitive industry, rather than being shifted to industries that could help the North American economy thrive in the long-run. So what will the economy look like in the future? I worry that our children will by left to deal with the effects of an inefficient socialist economy and a massive debt load, all because our politicians made the politically expedient moves, rather than the economically sound ones.

Cross-posted on The Shotgun Blog

Share Link:

Tags: Economy recession Keynes Keynesian economics bailouts capitalism socialism communism debt

Add New
Search
RSS

Comments (2)

2009-08-11 01:05:56 |198.103.221.xxx| Joe Man - Time for REAL change

Funny... all this talk and time wasted on a primitive way of life: Money.
Every person on the planet in some way has to deal with money. Some just handle their personal finances while others have chosen a career (life?) around money.
What a waste!!
If all people on the planet worked towards solving the planets problems instead of wasting time with money we would be colonizing space right now, not chasing our tales in hopes that the economy will rebound so we can do it all again.
I like to have a positive attitude about things, but I don't expect the human race will ever shake of the money chains.
- 1
- 0
Reply Quote