It’s clear that even if the recession were to be over anytime soon–and it’s not going to be over before the end of the year–job losses are going to continue for at least another year and a half.
Yes, like I’ve already written (though I can’t full credit, or even partial. There’s plenty of people that have been saying the same things) it’s going be a long and painful recovery. And, if we continue on our current borrow and spend, print and spend, nationalization, cap and trade, deficits, and “stimulus” trend, we’ll never get to recovery.
The details of the unemployment report are even worse than the headline. Not only are there large job losses right now, but as a way of sharing the pain, firms are inducing workers to reduce hours and hourly wages.
So, in spite of everything this administration is doing, the economy is trying its damndest to recover. See, this is exactly what is supposed to happen, and this is a GOOD thing. This is how bad decisions, the malinvestment, gets worked out. This is how resources get readjusted and reallocated. This should be a bright spot in the current situation, this is exactly what the administration should be trumpeting.
“Look, this will take time, but the economy is adjusting, is correcting itself, is making things right. The worst thing we could do would be interfere right now and forestall the recovery process.”
Well, one can dream can’t they.
If you include discouraged workers and partially employed workers, the unemployment rate is already above 16%
Where have we read that one before…oh yeah, right here.
So, how exactly are economic stimuli supposed to work?
The same thing happened last year: With a $100 billion tax rebate, only thirty cents on the dollar were spent while seventy cents were saved. Last year, people expected the tax rebate to stimulate consumption through September. Instead, there was an increase in April, May and June, with the increase fizzling out by July.
I’ll bet not like that. How’s that for a multiplier!! What would that MPC be exactly? Forget it, where are the bottles of buried cash!!
For the time being, of course, there are massive deflationary pressures in the economy: the slack in the goods markets, with demand falling relative to supply-and-excess capacity. The rising slack in labor markets, which are controlling wages and labor costs and pushing them down, implies that deflationary pressures are going to be dominant this year and next year.
Falling wages and falling prices, sacre bleu. Whatever will Professor Krugman say? See, just like we teach in econ 201, in a recessionary gap, wages and prices fall. Of course we know that this administration will do everything to make sure that doesn’t happen. Not going to let the mistakes of 1930 repeat, oh, wait a minute, nevermind…
But eventually, large budget deficits and their monetization are going to lead–toward the end of next year and in 2011–to an increase in expected inflation
And real inflation too. Actually, we’re already in an inflationary period. The money supply (yes, that graph…) has already been inflated.
Much higher rices will follow shortly.
One thing that the article did not mention was the role of investment. It isn’t consumption or income (see how deeply ingrained Keynesianism is) but savings and investment that will drive a recovery. At least one based on wealth creation and prosperity, not destruction.
Brown manure, huh? We all know what word he really ought to use!!