Wednesday, December 17, 2008

How to Prolong a Recession

Well, our federal reserve system has cut rates effectively to 0%, making money free for banks to borrow. Markets were up yesterday on that news, perhaps out of reflex, but inevitably down today as the obvious market implications began to sink in.

Our federal government is BANKRUPT and in massive debt; it has no money to spend. Furthermore, it has no, and has never had any, power to stop these economic readjustments. If the structure of an economy does not accurately reflect the wants and needs of it consumers (i.e., everyone), there must be layoffs and there must be bankruptcies and there must be a recession. That is how a free market works - by readjusting to changing realities of human desire and natural occurrences. There is no getting around an economic downturn and no such thing as a "soft landing." That talk is government propaganda.

It was Keynes who originated this bad idea, and even he realized what balderdash it was:
http://blog.mises.org/archives/009112.asp

According to F.A. Hayek, Keynes idea behind his deficit spending was to reduce real wages by causing inflation, thereby making Britain competitive again. In other words it was a political ruse and had nothing to do with economics.

For the best readable primer on money, visit: http://bastiat.org/en/what_is_money.html

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