Dear Friends,
It seems to me, the desire of economists, government officials, the media and brainiac 2000’s, that the economy grow in a straight line is as absurd as it is ignorant. Unending economic growth has been the siren call to economists, politicians and business elite for ever. They all want only economic expansion, (as do we all), and they will do anything in their power to get it, even destroying the engine of economic advancement, if that is what it takes. The desire for unending economic growth without recession has led our policy makers to take us down paths that can only result in perpetually lower economic growth. Such measures as fiddling with the interest rate to stave off recessions, bailouts, the ever increasing size and scope of monopolies as well as regulations designed to control the economy, are the norm. To paraphrase an ancient Chinese philosopher, (Mo Ti)… they spend that which they have too little of to gain that which they have too much of…
First lets define recession versus depression. A recession is a period of time where an economy shrinks and a depression is a period of time where an economy grows at less then it’s normal growth rate. A depressed rate. The effect of a recession is to eliminate inefficient businesses from the economy freeing up resources to be used in more productive enterprises. There is utility in a recession. A depression however, where an economy grows at less than it’s normal rate, has no utility. That lower growth rate lowers the economic lot of the people drastically and that lowering is multiplied over generations. Look at it this way… Let’s say you have a savings account and are normally getting five percent. One year in ten you get negative two percent. Now look at the same initial savings in another account where you get two percent. The first account will out earn the second by orders of magnitude. That difference is exaggerated over time, the longer you get the depressed rate, the lower the actual total returns.
Economic suicide has come to fruition in the modern welfare state. Japan is the poster child for a failure of welfare state economic policies but does the government of Japan change it’s policies? No, of course not, instead, they double down and claim they just need to pass more regulations, raise taxes and print more money, all so the government can spend more money on five thousand dollar toilet seats and thousand dollar swizzle sticks. If only the government had a bit more money they would fix the economy and everyone would be richer than rich. That line of argument is so transparent it shouldn’t fool a toddler but it seems to work exceptionally well on the highly educated new class.
Meanwhile the rest of the developed world follows Japan’s example of lost decades. The US has been in a depression since Obama took office and the government has done everything in it’s power to ensure it stays that way. The Federal Reserve has printed trillions of dollars and handed them to the monopoly banks, lowered interest rates to essentially zero when you factor in inflation, they under count inflation to make the economy appear to grow and the Obama administration has ushered in a tsunami of regulations and taxes that especially stifle small business growth. Not to seem unfair, they have even regulated the Internet, to protect the titans like Google and Facebook, from competition from small businesses. Economists sing the praises of Obama because the unemployment rate has dropped and there are no soup lines. Well, the unemployment rate has dropped because a record number of people are no longer in the workforce, and the soup lines have been replaced by EBT cards. Those measures have changed from that which is seen to that which is unseen…
The economy of any nation is like an organic system. An organism grows for a period then stops growing, even shrinking for a small time, then grows again. That is the way organic systems and complex systems grow. Rapid growth creates instabilities and inefficiencies, those sub par hindrances can only be addressed by short periods of rebalancing, in organisms and recessions in economies. Without those short periods of rebalancing, structural deficiencies grow out of control until the organism gets cancer, or an economy becomes inefficient to the point of depression. Like the illustration earlier in this article… that less than ideal growth rate drives down the economic standard of everyone. That lowered economic outcome is more obvious at the bottom of the economic ladder and less visible at the upper end.
That lowering of economic outcome for those at the bottom of the economic scale, creates conditions where hate, envy and jealousy flourish, but the fix the elite propose is always more of what caused that lowered economic outcome in the first place. There are never enough jobs, wages, savings or start ups in an economy but they are spent to create more welfare, monopolies, taxes and regulations. So we can say with certainty… the elite spend that which we have too little of to get that which we have too much of. The question is, how long are the rest of us going to fall for the flim-flam?
Sincerely,
John Pepin
