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August 25th, 2010 
Clint Why do so many people in politics and the media keep trying to say that there is an economic recovery taking place- or that one is just around the corner?
Maybe part of it is an emotional investment in the left leaning Keynesian economic policy of so many of the worlds governments? People had an unrealistic expectation that Barack Obama was going to save the US from the inept machinations of the big bad Republican Party. So even though there is no recovery taking place, their political allegiance means they have to toe the party line and accept that the trillions in debt added to their children and grandchildren is doing what their saviour had promised it would.
I am sorry to break it to you, but there is little functional difference between George Bush and Barack Obama. It doesn’t matter what they say or promise, all that matters is what they do… and what they both do is harm.
I think that the biggest contributor to the inability to see that there is no recovery taking place is that too many people don’t understand what caused the economic collapse and what it will take to correct it.
The recession is not the problem, it is the cure.
The economic collapse came about because of government overspending and meddling to artificially expand the market. This was done partially through ignorance but mostly through self interest in the race to curry favour with the particular voting block that the politicians courted. It was a race for politicians to see who would promise to spend more of other peoples money to buy votes.
So they put forward that the cure for this overspending and meddling in the market was to spend even more while taking over businesses and writing thousands of new rules and regulations to add to the tens of thousands that already exist.
If, back in 2008, I had been able to grab our political leaders by the lapels and yell advice into their face, it would have been – “Don’t just do something, stand there!”.
If they had done nothing, the recession would damn near be over by now. Companies would have gone out of business and people would have lost jobs- then other companies would have bought any valuable assets of the defunct businesses and rehired many of those displaced workers. Not all of the companies would have been bought up and not all of the displaced workers would be rehired by now- but we would be on our way.
If they had needed to do something, they could have cut spending and cut taxes. A dollar left in the hands of business men and women who are trying to turn it into more dollars does far more good to the economy than a confiscated dollar in the hands of a politician who sees it primarily as a tool to get more power and votes.
Instead, most every state on the planet has gone deeper in debt than ever before in history to keep pushing the economic ramifications off to the next year… then the next quarter… the next month… next week… then they will pray to get through the day without having to face the consequences of their actions. They are bankrupting the future in a vain attempt to stave off the cure!
I don’t really know how it is going to play out but the PIGS are closing in on their collapse and the North American and European “Stimulus” is set to be tapped out come next spring.
My expectation is that we will see the real economic turmoil beginning in the spring or summer of 2011 and that it will hit far harder than it would have if they had stepped aside and let the correction take place back in 2008. It should also last a lot longer because most governments have accumulated an unsustainable level of debt pushing the solution off for as long as they could. They are like little children who see the doctor with the needle as the problem, not the cure.
The Canadian government never put in the same effort to artificially inflate the market that our neighbours to the south did and the Harper administration didn’t react as irrationally to the crisis as the Obama administration did. There were a lot of people in the other parties and the media who attacked Harper for this and continue to do so to this day.
I think that Stephan Harper only followed the “spend our way out of debt” tactic as far as he did out of political expediency. If he had gone out of lockstep with the ever so popular spendthrifts it would have been political suicide. Setting aside their faults, and like all politicians they are myriad, the “right” understand economics far better than the “left”. That doesn’t mean they won’t throw reality under the bus if it means they get to keep or achieve office, it means that they will do it less often than those who can’t tell reality from fantasy.
And Keynesian economics is a fantasy. It is a fantasy that feeds on the politician’s vanity, ego and need for self aggrandizement. Boiled down to its essence, Keynesian economics states that the market can’t function without the directing hand of the politician. How could this not appeal to the politician? It puts a veil of respectability over the fascism/socialism that beats in the heart of even the most idealistic of politicians.
Maybe that should read “especially in the heart of the most idealistic of politicians”?
Business cycles are part of how the market functions; they are a feature, not a bug.
Capitalism is based on economic evolution. Systems and businesses that are better suited to the market environment succeed and those less suited go extinct. Keynesian economics is structured on ensuring that dinosaurs don’t go extinct…at the expense of those pesky little furballs running around their feet.
I have to start creating some updated graphics that can be put into the Creative Commons so the we don’t have to rely on antique images from NASA.
