Thursday, January 15, 2009

The Recession

The usual statements are all being bandied about with the daily economic news: "the worst economy since Herbert Hoover," "another Great Depresssion," etc., etc. But in the midst of what are undoubtedly really challenging economic circumstances for a great many people, a little perspective is in order. FWIW, here's my take on the story we find ourselves in at this point:
  1. "Bail-out" is another word for theft. The root of the mess we're in has to do with the fact that a large number of people borrowed money they couldn't repay, to buy things they didn't need, to live a life they hadn't earned. Which is, in a sense, legalized and glorified theft. And now, these same people and corporations are being "bailed out" by those they stole it from initially. Insane.
  2. Moral people are required for a free market. Whenever there is a collapse like this (see also Enron, Worldcom, etc.), there is a call for "more regulation." But in a culture where people are moral, little or no regulation is needed. In one that isn't, no regulation will be sufficient. This is because the profiteers at places like Lehman's will always be one step ahead of the regulators. It's part of their job, after all. Thus do the regulators wind up fighting the last war. But each new round of regulations makes the market a little less free. To the point where we have now virtually nationalized an entire sector of the economy.
  3. More Government is likely to cause more problems than it solves. The Fed has now cut key interest rates down to near 0% and the Treasury is on a printing/borrowing binge. This will sow the seeds of both roaring inflation and the next collapse. And, of course, another round of regulations, resulting in less freedom. Meanwhile, we will have indebted our great-granchildren for the sake of pork projects and more corporate welfare. By the way, even liberal economists are beginning to notice that FDR's policy of "super-sizing Herbert Hoover" prolonged the Great Depression, rather than shortened it. Which means a "New Deal 2.0" as is being proposed will most likely make things much, much, worse.
  4. Don't borrow more than you can pay back. Obvious, I know, but well worth remembering. Now that we are facing an annual deficit in 2009 that is larger than the size of the entire government was in 2000, this is especially true. What's good for people on a household basis is still good when we aggregate those households into a nation.
  5. The people who are the worst off aren't in the U.S. As usual, our actions have global consequences. Those in the Global South are much worse off than even the poorest among us here. When America catches cold, the rest of the world gets pneumonia.
  6. Things aren't that bad. Despite all the hyperbole, total unemployment in the U.S. is 7.2%, far lower than the 10% of the early 1980s or the much worse 17% average of the FDR 1930s.
  7. God is still sovereign. 'Nuff said.

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