|
PureBytes Links
Trading Reference Links
|
EXACTLY, THE
GOVERNMENT IS GETTING IN THE WAY.
<FONT color=#0000ff
size=2>
Look at what Bush
did for the steel industry. He's holding them "bums" up with the import tariffs
and restrictions.
Interestingly,
the OPPOSITE is true for the IT services industry with the multitude of H-1B and
the L-1 visa issuance of the past 2 years.
That industry in
the US has declined to nothingness....never to return.
What gives ? Why
this UN-EVEN treatment ?
Answer: dumb,
poorly thought-out legislation and more importantly, slow reaction
time to correct these "mistakes".
<FONT color=#0000ff
size=2>
If everyone in
business for themselves took as long as the government to correct their business
"mistakes",
there would be no
commerce, everyone would be out-of-business !
<FONT color=#0000ff
size=2>
<BLOCKQUOTE
>
<FONT face=Tahoma
size=2>-----Original Message-----From: Charles Meyer
[mailto:chaze@xxxxxxxx]Sent: Tuesday, July 08, 2003 9:55
AMTo: REAL TRADERSSubject: [RT] GEN: VON MISES & THE
ECONOMY
----- Original Message -----
From: <A
title=article@xxxxxxxxx href="">Mises Daily
Article
To: <A title=article@xxxxxxxxxxxxxxxxx
href="">Mises Daily Article
Sent: Tuesday, July 08, 2003 8:12 AM
Subject: Recovery or Boomlet?
<A
href="">http://www.mises.org/fullstory.asp?control=1265
<FONT
color=#002864>Recovery or Boomlet?
by William L. Anderson
[Posted July 8, 2003]
<IMG src=""
align=right border=0 NOSEND="1">In recent weeks, the stock market has staged a
mild rally. Though the most recent unemployment numbers are well over six
percent, Republicans, as well as a few market analysts, are claiming that the
long overdue economic recovery has arrived. While I wish that were the case,
the facts demonstrate otherwise; this is not a recovery, but simply an
unsustainable mini-boom that makes the long-term economic picture even
worse.
That is not how we hear things from the government, not
surprisingly. Administration officials, hopeful that a strong economy next
year will boost George W. Bush's election chances, have been trumpeting the
end to the longest economic downturn in this country since the Great
Depression of 70 years ago. His media supporters, such as <A
href=""><FONT
size=2>Larry Kudlow, and <A
href=""><FONT
size=2>Neil Cavuto also agree and have called for
the Federal Reserve System literally to open the money spigots. According to
Kudlow:
No matter what the investment -- be it corporate profits
paid out as dividends, or capital gains, or new capital-goods orders and
shipments by large and small businesses, or new high-risk venture start-ups
-- higher after-tax investor-class returns will place new liquidity demands
on the financial system. The Fed must accommodate them.
A shock-and-awe liquidity-expansion policy from the Fed will
counter our underperforming economic recovery, offset the forces of
worldwide deflation and recession, and stomp out deflation fears at home. An
aggressive liquidity stance will also accommodate rising transaction demands
following the latest Bush tax cut. And it will even counter the negative
effects of any potential breakdowns in the investment portfolios of Freddie
Mac and Fannie Mae, the troubled loan institutions.<A title=""
name=_ednref1
href=""><FONT
size=2>[i]
Of course, "liquidity expansion" in Kudlow-speak is nothing
more than a burst of inflation, and the Federal Reserve has followed suit,
lowering its discount rate to something not much above zero. (Kudlow and the
other inflationists wanted the Fed to cut its rates by more than what was
actually done, but it would seem that the next logical step for the Fed would
be simply to dump money from helicopters or hand it to passers by at the
street corners.)
Kudlow is hardly the only offender here, and while his "shock
and awe" analogies are over the top, the truth is that economists and pundits,
both left and right, have been calling for basically the same solution:
inflation, and more inflation. This not only reflects the total
misunderstanding of the current economic situation by both the economic
mainstream and political pundits (Well, what would we expect?), but also
demonstrates ignorance both of business cycles and of money
itself.
As Murray Rothbard and Ludwig von Mises tirelessly pointed
out, an economic recovery occurs when consumers and investors begin to direct
investment into sustainable lines of production. A recovery can only happen
after the malinvestments that accumulated during the previous boom
are substantially liquidated. Of course, <A
href=""><FONT
size=2>a liquidation must be permitted to occur
in the first place, something that the Bush Administration and the Fed have
fought at every turn, which <A
href=""><FONT
size=2>I note in previous articles.
Given that the government has done everything in its power to
prevent the full liquidation of malinvested capital, and given that the Bush
Administration and Congress have substantially increased the burden of
government that must be borne by individuals, it seems clear that the U.S.
economy is not poised for a recovery. Indeed, from airlines to manufacturing,
the liquidation has a long way to go before the economic downturn hits
bottom.
Thus, any upturn whether in economic statistics or in the
stock market is almost certain to follow the patterns not of economic recovery
but rather a mini-boom. I say "mini" because there is no way that this
particular boom, as pathetic as it is, can be sustained for a long time,
unlike the boom of the late 1990s. In fact, the Fed's recent actions can only
force more malinvestments which themselves will have to be liquidated in the
future.
There is historical precedence for a mini-boom. During the
early days of the Franklin D. Roosevelt Administration, which were marked by
the passage of legislation like the <A
href="">National
Industrial Recovery Act and the Agricultural
Adjustment Act, the economy also experienced a small boom. In fact, the rate
of unemployment, which stood at about 25 percent when FDR took office in 1933,
fell to about 15 percent two years later.
The Roosevelt Administration was not the only active entity in
Washington. The Federal Reserve System had lowered its discount rates to
near-zero and the government was trying to force up the inflation rate, using
tactics like destroying the gold standard and confiscating all gold money that
individuals possessed.
The strategy worked, sort of. As noted earlier, some people
were put back to work (although thousands also found employment doing
government-sponsored tasks), but the boom was only temporary. Government was
growing quickly, along with the tax burden, the regulatory state was taking
form, and FDR openly savaged businessmen and his comments, as <A
href=""><FONT
size=2>Robert Higgs has written, had a dampening
effect upon the private investment needed to bring real recovery.
Roosevelt's mini-boom came to a screeching halt by late 1937,
as the economy fell into the trenches again, the unemployment rate zooming to
about 20 percent. To put it another way, FDR achieved a first: he helped to
create a depression within a depression.
One hopes that the Bush Administration does not seek to
emulate FDR, although, like Roosevelt, this administration has forced through
huge increases in government expenditures and with the recent Medicare bill,
has dumped a gargantuan unfunded liability upon U.S. taxpayers. (At least FDR
did not send the armed forces all over the world – at least during the 1930s.
In the 1940s he helped launch the biggest and most destructive war in world
history.)
As we hear the political pundits and mainstream economists
debate the current economic climate, perhaps terms like "shock and awe" truly
are appropriate. One is shocked at the economic ignorance that is demonstrated
time and again by the "experts," who are still stuck in a Keynesian time warp
that while discredited, still seems to rule the intellectual roost. And one is
in awe of the truly bad policy prescriptions that emanate from the White
House, Congress, and the mainstream press.
Yes, 2004 is an election year, and the Bush Administration is
desperate to make voters believe that the long-awaited recovery finally is
here. Furthermore, there is no shortfall of Republican pundits trying to
publicly make the case that the economic policies of Bush II really are better
than the policy disasters of Bush I.
However, there simply is no way that the policies of the Fed
and the Bush Administration are going to give us an economic recovery. As
Mises and Rothbard wrote time and again, an economic recovery within a free
market economy occurs as a matter of course once the government steps out
of the way. That clearly has not happened for the past three years,
and now that Bush is desperate to manipulate the economy in order to pave the
way for re-election, it is not politically possible for this president and his
underlings to take the needed hands-off approach to the economy.
Instead, we will be given the news that the wise policies of
the Fed and the meager and back loaded tax cuts that the Republicans have
given us will be enough to bring recovery. However, pay no attention to the
man behind the curtain (whether it be George W. Bush or Alan Greenspan), for
he does not know what he is doing. We are not in recovery; it is nothing more
than a little boom that ultimately will turn into a bigger bust.
William Anderson, an adjunct scholar of the Mises Institute,
teaches economics at Frostburg State University. Send him <A
href=""><FONT color=#000080
size=2>MAIL. See his Mises.org <A
target=_blank
href=""><FONT
color=#000080 size=2>Articles Archive<FONT
size=2>.
<A title="" name=_edn1
href=""><FONT
size=2>[i] Larry Kudlow, “Pour it On,” <A
href="">www.townhall.com<FONT
size=2>, June 17, 2003.
<A
href="">[Print
Friendly Page]
<FONT face=Arial
size=3>
<A
href=""><IMG
alt="" hspace=0 src="" border=0
NOSEND="1">
<A
href="">Mises Email List
Services
<A target=_blank
href="">Join the
Mises Institute
<A target=_blank
href="">Mises.org
Store<FONT
size=2>
<FONT
size=2>
<A target=_blank
href=""><FONT face=Arial
size=1>Home |
<FONT
face=Arial size=1>About<FONT face=Arial
size=1> | <A target=_blank
href="">Email
List | <A
target=_blank href=""><FONT face=Arial
size=1>Search |
<FONT
face=Arial size=1>Contact Us<FONT face=Arial
size=1> | <A target=_blank
href=""><FONT face=Arial
size=1>Periodicals
| <A target=_blank
href=""><FONT face=Arial
size=1>Articles<FONT
face=Arial> | <A target=_blank
href="">Games &
Fun<A target=_blank
href=""><FONT face=Arial
size=1>News |
<FONT
face=Arial size=1>Resources<FONT face=Arial
size=1> | <A target=_blank
href=""><FONT face=Arial
size=1>Catalog<FONT
size=1> | <A target=_blank
href=""><FONT face=Arial
size=1>Contributions<FONT
face=Arial> | <A target=_blank
href=""><FONT
size=1>Freedom
Calendar<FONT
size=2>
You are subscribed as: chaze@xxxxxxxxTo
unsubscribe, click here: <A
href="">http://mises.biglist.com/unsub.php/article/chaze@xxxxxxxxor
e-mail: <A
href="">article-unsubscribe-chaze=cvtv.net@xxxxxxxxxxxxxxxxx
To
unsubscribe from this group, send an email
to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour
use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
Yahoo! Groups Sponsor
ADVERTISEMENT
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|