Free Markets, Free People


Recovery? Maybe it is time to use the “D” word

Market Watch writer Al Lewis opines:

The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.

It’s just that like radiation — it’s invisible.

Uh, no.  It’s no.  It is simply a word, a description, that most of the media refuses to use.

Here, try it out.  “Depression.”  See, it’s not so hard.

In fact anyone who takes an objective look at what we’ve been suffering has concluded that while our current condition may not fit the arbitrary definition of whatever is considered a depression today, our economy certainly isn’t in any condition to be called recovered or even “recovering”.  In fact, it is a disaster:

 

073112recovery1

 

In a new research note, JPMorgan points out that since 1970, Japan, Finland and Sweden have all gone through what the U.S. is currently going through. And all three of them had recoveries stronger than America’s. The above chart compares the economic recovery — as measured by real GDP per capita — of each nation at different points after the trough of their recessions. And the U.S. is in dead last after 12 quarters from the bottom.

Take a particular look at Japan.  That is the economy during the “lost decade” that we’re currently underperforming.  Says JP Morgan’s Michael Feroli:

The poster child for slow growth coming out of a debt-fuelled financial crisis has to be Japan, which ever since the early 1990s has had trouble getting a head of steam. The recession which kicked off Japan’s “lost decade” lasted from 1991 to 1993. Including the recovery experience from that recession is sobering: we are currently faring worse than Japan at the same point in their lost decade.

So what’s the plan?  How are we going to work ourselves out of this position?  What policies will we institute to begin the actual, not pseudo, recovery?  Well, it’s an election year.  Don’t expect to hear the hard truths from this administration.  Instead, prepare to be reminded “its working”.  That in spite of reality:

As the economy reels, the national debt approaches $16 trillion, and we hear fears of Congress jumping off a fiscal cliff by year-end. Many states and local governments are struggling with massive deficits, too. Three California cities have filed bankruptcies.

U.S. companies are warning of slower growth amid Europe’s meltdown, yet the Dow Jones Industrial Average has crossed the 13,000 mark, and some observers are predicting new highs for the index soon.

The rising stock market is as counterintuitive as interest rates falling to new lows after the U.S. lost its triple-A debt rating last year. It isn’t that investors aren’t wary. It’s just that every place else makes them more wary. This isn’t the definition of a recovery.

No, it’s not.  But then Lewis doubles down with stupid:

The cure for our battered economy has been to allow our disasters to occur more slowly through taxpayer bailouts and extraordinary interventions from the Fed. So far, this strategy has worked. We have averted a sudden crash in favor of a depressingly slower one.

As we said from the very beginning, you can either let the economy takes its course and suffer the results quickly, get over it and recover, or you can find a way to extend it to where the effect may not be as dramatic but will linger and linger and linger.

We chose the latter path and it hasn’t at all worked out the way it was predicted (remember, at this point, unemployment was supposed to be in the 5% area if the stimulus was approved and 8% area if it wasn’t – so it’s hard to say “it worked”, isn’t it?).

The spin says the downturn was softened.  But again, I point to the promises vs. the reality.  We are no better off in terms of unemployment than it was claimed we’d be if we didn’t go an additional trillion dollars in debt.

And the economy isn’t recovering, it’s bouncing along the bottom of a trough with the possibility of going even lower if Europe implodes.

Yet the only plan I’ve seen or heard about is to repeat what failed previously with the Fed talking about a QE3 while we’re already awash in about 10 trillion dollars in funds it has already injected.  I don’t know about you but I simply haven’t much confidence in Ben Bernanke’s assurances that he can wring all that cash out of the system without triggering another economic downturn or hyperinflation.  History is not on his side.

I think Ace points to the truth of the matter that the media and politicians simply won’t touch:

This is the worst "recovery" by any nation since 1970, and it could be partly due to a category error: We’re not recovering from a recession, we’re still in the depths of a depression.

That’s right, it isn’t the “worst recovery”.  There hasn’t been a recovery. There have been “bright spots” here and there which quickly faded, but overall, we’re in the same place economically we’ve been for months and years.  And it isn’t an “invisible” depression to the unemployed and those who’ve given up hope and dropped out of the job market.  It is very visible.  And most likely they remember the promises and the results.

Of course, instead of facing this and holding politicians accountable, our media will continue to play to the distractions, the nonsense and the irrelevant instead of asking the hard questions, demanding answers and informing voters.

Unfortunately, such is life in America today.

~McQ

Twitter: @McQandO

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28 Responses to Recovery? Maybe it is time to use the “D” word

  • “unexpectedly”

  • Some of us have been using the “D” word for about two years: http://scotterb.wordpress.com/2010/09/07/great-depression-ii/
    The thing is, structural imbalances have been building for thirty years, and de-regulation has yielded a down right destructive financial sector.  The crisis is global and will take at least another five years to work through.  Britain tried to let the depression run its course in the 30s and it didn’t work – markets don’t magically recover, depressions can spiral downward and stick.  The tools being used are avoiding widespread pain and allowing the restructuring to occur without the kind of suffering Great Depression I caused.

    • …markets don’t magically recover…

      Well, that is kind of true, actually.  To a “dog watching a tune-up” like you, all market performance is “magical”.
      But markets DO self-rectify…rationally…if left alone by powerful fools who cannot BEGIN to have the information needed to guide them.  Take the stock-market “crash of ’29″.  The market had recovered only a year later.
      “The tools being used” in this case are people who voted for Obama.  And the idiot faux intelligentsia like yourself.
      Want some models?  Start with Canada.

    • …structural imbalances…

      Usual class warfare bullspit, eh comrade?

      “...de-regulation has yielded…

      What deregulation?  It’s cronyism as the political party pendulum swings back and forth, such that the cronies change every few years.  But licensing and regulation have steadily increased for decades.

      …markets don’t magically recover…

      Just because you’re too stupid to understand complexities, doesn’t make the result magic.  Anyone who cites “magic” or “invisible hand” when discussing free market commerce is a fool.

      …depressions can spiral downward and stick.

      Examples?

      The tools being used are avoiding widespread pain…

      …by spending our children’s and grandchildren’s money.  Great, what happens when our children and grandchildren are left with an economic disaster?
      Pain isn’t being abated.  Businesses are failing or holding tight hoping for Obama to lose, while unemployment leaves people out of a job (which is painful).  The “stimulus” money was blown on cronyism and boondoggles like Solyndra and high speed rail. (h/t Warren Meyer)

      • …structural imbalances…

        That is Erpese for “stuff I’m vaguely waving in the direction of, that if I was specific about I’d immediately be subjected to mockage”.
        You know.  Like “debt” being the root of all evil.

        • It’s the same sentiment as “you didn’t build that” and “life’s lottery winners” (Obama and Gore).
          When you start with the assumption that all property belongs to everyone, any “system” in which some people get more than others is baaaad.
          When you start with the premise that each individual owns his or her own life, to include the application of talent, effort, courage, etc. in earning values, a disparity between rich and poor is not a problem.
          When one person takes a chance and applies her talent to building a business to get rich, while another is dumb or lazy and languishes in poverty, that’s not unfair.
          When people gain advantage through theft, graft, or government power (e.g., rent seeking, licensing to give established and connected an advantage, monopolies, regulations written by the cronies to give themselves an advantage, etc.), that is unfair.
          Of course, Scott will just whine that the people who succeeded only did so because their parents had money, which gave them advantages, and the poor kids on the other side of the tracks were not given a level playing field, implying that all parents who are middle class or rich somehow cheated to get there and that all parents who are poor were only poor because of suppression by “the man”.  But we all know that’s rubbish.  Scott doesn’t refrain from using his money and education to help his kids.  Otherwise, he’d move to the ghetto, become an addict, and inflict every manner of bad parenting so his kids wouldn’t be unfairly advantaged over any other kids.
          Rather than volunteering to help “disadvantaged” kids with his time and/or money, Scott would rather use a proxy to plunder your money and arbitrarily dole it out on the premise that it’s levelling the playing field.  Of course, we all know government even do that as proponents claim.  When it’s not directing the money to cronies, it implements big giveaway programs in a manner which actually does harm, like giving incentives for people to be irresponsible.  For example, everyone knows that black families have been devastated by welfare.  Instead of helping, government does harm.  But so long as the intention is to correct injustice, then their failures are to be excused.
           

    • How about that OWS, eh comrade?

  • The last thirty years has proven that de-regulation is a bad idea, markets need the state and a solid regulatory regime to function well.   People with blind faith that markets always work well are living in an ideological fantasy land, so enthralled by theory that they ignore practical reality.   I suggest “The Myth of the Free Market” by Mark Martinez.  Free marketeers tend to think they understand the economy because they know the basics of theory, but they miss all the ways in which reality undermines how the theory works in the real world.  Yes, markets are very good and necessary.  But they need the state, they need regulation, and they need rule of law.

    • Good and necessary“  makes a come-back…!!!!
      Dr. Cliche strikes again.  Heh.

      But they [markets] need the state, they need regulation, and they need rule of law.

      Well, nice straw-man, Erp!  Nobody REMOTELY suggested that markets don’t flourish under a basis civic structure, although the CAN function quite well outside of one.  Consider eBay, which transcends law.  Consider industry standards, which are market creations and MUCH more effective, responsive, and subtle than any regulation COULD be.
      But “needing regulation”…???  What a greasy comment.  That could…knowing you…be slid around all over the map.
      Most regulation is not only not necessary, but downright counter-productive, and virtually NEVER does as it pretends to do.
      Are we “deregulated”?!?!  Have you seen the Federal Register, you moron?
      Seriously!

    • The last thirty years has proven that de-regulation is a bad idea…

      You’re lying, again.  There hasn’t been any substantive deregulation.

      …markets need the state and a solid regulatory regime to function well.

      Faith, ideology, etc..  You’re a self-parody.
      The state introduces cronyism, corruption, distortions, and ultimately widespread plunder when the plunderers see the end coming.

      People with blind faith that markets always work well are living in an ideological fantasy land…

      Yes, they are living in your fantasy land.  They’re your strawman.
      In the real world, some people understand, through reason, that it us unethical to use aggressive force against others, which is what is needed (at least threatened) for people wielding government power to plunder, redistribute, and engage in cronyism.
      Also, work for whom?  For the politically connected cronies?  Sure.  Absolutely.
      But nobody with any sense believes that any system or lack of system will guarantee results.  Anyone like you who promises guarantees is either lying or using other people’s money…until that money runs out, of course.

      I suggest…

      That’s rich.

      Free marketeers tend to think…

      You don’t know what they think, so you make it up.  You’re too stupid to get it, as you’ve demonstrated.  You don’t even want to try, because you have blind faith in your collectivist government solutions.

    • How’s that twitter revolution in the mid east working you, eh comrade?
       

  • Canada’s been doing well.  Germany and the Scandinavian countries have being doing very well (except Iceland, which unfortunately followed the ‘believe in the market and de-regulate fantasy).  Luckily the Icelanders have thrown out the economic idiots who bought that “de-regulate and the let the market operate” delusion.   The real world destroys such ideological foolishness.

    • That would be the Germany and Scandiavian nations that cut taxes and HAVE turned to markets increasingly?  Those nations?
      Like Canada?  Like Hong Kong?  Like even poor India, which is STILL burdened with the vestiges of socialism, but has exploded after turning to market economics?
      Those nations, you poor boob?

    • Iceland is  A Nordic country, not a Scandinavian one. Scandinavia us Sweden, Norway and Denmark. Iceland, Finland, Faroe Islands etc are Nirdic.

    • The “science is settled”, eh tovarish?

    • And what part of the “real world” do you inhabit?  Canada, Germany & Scandinavia didn’t have to deal with, as you call it, the “ideological foolishness” of de-regulation because they never got their knickers in a bunch tight enough to have to regulate in the first palce.  But one thing that is consistent with all of them is none of them fell for the “Stimulus” con.  All of them deal with balanced or near balanced budgets.  All of them either cut taxes or reformed their tax code to the extent the tax burden was reduced.  And Germany, when pressured by Obama, told him to take a hike when he put pressure on them to develop stimulus programs.  in addition Germany, taking the lead within the Euro Zone, insisted upon common-sense austerity measures from Greece & Spain prior to any bail out measures.  So it boggles the mind when you point to these examples and then try to justify you BS appoach to economics.  You are laughable!!!

  • Nothing gets on my nerves quicker than listening to the Obama administration opine how our economy is improving. From where I sit, I can’t tell it is improving one iota. They must not be living on the same continent I am living on. It is dismal out here in the real economy and it isn’t getting better.

    • What you are suffering from is “cognitive dissonance”.
      It is a serious thing that can lead to depression.  I chose to just get indignant.  I hate a liar.

      • If I had to listen to him very long, I would sure enough go into depression. My indignation level rises quickly if I listen to one of his speeches.

  • Maybe you ought to compare how those countries (and add Germany and France to the list) resolved their problems.  All we can do in this country is argue and filibuster.

    • If only we could be more like China, where our intellectual and moral betters could just rule by fiat! The left isn’t going to get its way for much longer and you’re getting cranky. These appeals to compromise always happen just as the left starts losing the debate. Sorry pally, not this time. No compromise EVER with the fascist left.

  • I think I have this Erb thing figured out; Prof. Erb is to Prof. Irwin Corey as Ott Scerb is to Erb.

    In other news, I was browsing, and noticed that GDP increased during the Great Depression, just as it is now. Perhaps we should call this the Lesser Depression, or maybe the Great Anxiety.

    “ Because of the uncertainty created for business investors by the multitude programs of the New Deal those efforts to stimulate the economy were offset by their adverse on business investment. This is part of what prolonged the Depression.”

    An excerpt from what I think is a good article about the Great Depression; “The Recovery From the Great Depression of the 1930′s”
    http://www.sjsu.edu/faculty/watkins/recovery.htm

    I realize it probably doesn’t meet the high standards of scholarship shown by the eminent economist and raconteur Prof. Erp of MossBackMoose U., being written by a mere economist and not a real scientist,  but it makes sense to a semi-literate peasant like me.

    “Conclusion
    The immediate cause of the recession that became the Great Depression was the collapse of private investment. This major component of demand fell from $92 billion in 1929 to $9.9 billion in 1932. Exports fell as well but so did imports. During this recession in output the unemployment rate increased from 3.2 percent to 25 percent. Government purchases were increasing somewhat during the period 1929 to 1932 but not nearly enough to compensate for the decrease in investment. After 1932 there were increases in investment and goverment purchases and a resulting growth in GDP but the increase in production was not enough to wipe out the pool of unemployment that had accumulated during the recession period. Therefore unemployment remained high and the economy was thus still in a depression. Investment remained volatile during the period of the 1930′s, in part because of the uncertainty created for business by the radical and shifting policies of the Roosevelt New Deal. “

    • Amity Shlaes’s “The Forgotten Man” does an excellent job of demonstrating how, first, the reasonably intelligent Hoover made things worse, and then how the scrambled eggs for brains Roosevelt and his team of geniuses really poured sand into the gas tank. Roosevelt was a strangely envious man who detested people who could actually do things. His treatment of the great businessman *and* entrepreneur Andrew Mellon was the purest case of this. Mellon himself had served in the three prior administrations as Secretary of the Treasury. Roosevelt’s “brain trusters” were all enamored of Soviet Russia and/or Fascist Italy, which they believed were variations on, rather than competing visions, the wave of the future.

  • “Depression” was the word to use to describe this two years ago.But it wasn’t accurate then and it’s not accurate now.What it is, is the regime conducting economic warfare against its citizens.The program was from the begininning ruin and dependency, until there is nothing left to depend on.If you know who Obama is, what his training has been, what he believes, and who his associates were and are, this is perfectly obvious.

  • And, Erb, markets work because they are the only way that the “knowledge problem” is effectively addressed. The “smartest” regulators in the world conspiring in the cloakrooms of the U.S. Capitol, even if they had the best of intentions, have insufficient information to decide how buying and selling should proceed. The only sufficiently informed parties are those who are party to transactions and contracts. You are too “smart” to understand this.