Q: What is the state of the US Economy? A: Stuck!

More and more talking heads are describing the economy as, stuck, set on pause, undecided, risk adverse, and one even used the phrase, “Caught like a deer in the headlights”, to describe the state of the economy. The later must have grown up somewhere other than Wall Street or inside the DC beltway.

But very few are identifying the cause, or are unwilling to speak of the real problem. It is all the cramdown legislation by this administration and the Democrat controlled Congress. Note: If the GOP party were in power and acted the same way, the outcome would be the same. A cat will purr and a rattlesnake will strike with no regard to political party.

The time/date stamp reflects when the post was written and not the date posted.

A capitalist free market economy is a living, breathing, entity; The cells, individuals, respond to stimuli, but these cells are reasoning individuals. And right now they see a lot of pending legislation that could greatly, and negatively, affect their future ability to prosper. In short, no one knows what to do because the rules, even as short as one year in the future, are in a state of flux. And yes, our nation has been here before. It was called “The Great Depression”. Most economists today acknowledge the failure of the Federal Reserve to poor money into the economy started the decade but it was FDR and his Congress that failed to act responsible, not just talk, to end the uncertainty. FDR was the beginning of interest group politics, which is alive today in the Obama administration. This is somewhat true of the Republicans also but the Democrats have perfected the tactic which held until Ronald Reagan The bankers finally just gave up and quit lending. The only way to preserve assets was to sit on them less the next piece of legislation reduced the assets or subjected them to large taxes. Sound familiar? Business, from small to large, just worked to survive – pretty much on their own as most of the government programs made no sense. As an example, FDR and his advisors, decided to slaughter livestock and destroy crops to raise farm prices. All while people were starving! He shored up the unions while other workers lost purchasing power. The result was that non-union labor could not afford anything union made – that included coal and rail transport. Barter often replaced currency in rural and small town America.

Keynesian economists, like Paul Krugman of today, claim government did not spend enough. All one has to do, according to them, is look at the deficits spent on WWII, which really ended the depression. But there was a big difference between the war effort and the government spending to end the depression. Everyone understood the need to produce for the war but except for the CCC and the WPA, few people saw any benefit from all the depression spending. Even during the war effort, few really saw their financial state improve until after the war when the economy really took off.

An excellent book is The Forgotten Man by Amity Shlaes. In spite of what her critics claim, she doesn’t really take a position; Rather she explains the depression policies and the people that advocated both sides. Truth is, both the Hoover and FDR administrations pretty much stumbled along. Economics was not a strong point of the politicians of the time. One could argue they haven’t learned much since.

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