The thing with anti-cyclical policy, is that ultimately, it never works and it tends to prolong a recession by slowing the liquidation of malinvestment (i.e. keeping companies alive that should hurriedly die.). The longer that malinvestmentl is preserved, the slower that quality investment grows.
Classic examples of counter cyclical policy was the Hoover New Deal, which took a sharp recession and turned it into a massive depression, and the FDR New Deal, which kept the United States from positive growth for longer than it otherwise would have been, until World War II came along.
Obamaās stimulus is another, lesser example.
We should avoid all counter cyclical policy. The recession, once started, should be allowed to run its course and perform its necessary function of liquidating malinvestment without interference by the government.
Sears, Penneys, Macyās, etc, etc, etc are things that should be eradicated by this upcoming recession and they should be allowed to die without interference.
The key difference is that it was not a contrived, short term solution and it was rather a unique situation. While there was massive war spending, the end of the war left the United States in a favorable economic position for many years thereafter, due to massive world wide destruction. Not a situation that will likely present itself again.
We have to be sure we are not confusing correlation with causation. Unrestrained, an economy will come out of a recession on its own. A recession is merely a necessary correction. In this case, the economy, already shifting into recovery, was unnecessarily jolted by the stimulus, thereby beginning again the process of creating bubbles and thus leading us to the conditions were we are getting ready for another recession.
I opposed the stimulus as unneeded and unhelpful when it was proposed.
The economy will recover and it WILL enter periodic recessions, due to the nature of our monetary and banking system. The TIMING of recessions can be due to government interference, such as the Obama stimulus and the Trump trade war. But ultimately, true economic recovery can only be had by the actions of the market, once the recession has killed off bad investments.
The credit for the long term sustained growth goes entirely to the free market actors. Government can never create growth or prosperity. They can create bubbles and distort markets by unwarranted intervention and they can certainly hasten recessions, but only the market can create growth and prosperity.
The best policy is for the government to allow recessions to proceed without intervention. In a fractional reserve monetary and banking system, a recession is a necessary condition to purge the economy of bad investments.
No, though it may have effected the timing. This recession would have inevitably occurred, as will future recessions. Trump had a greater role in the timing.
Isnāt it generally accepted that it began in late 2007 or early 2008? I understand perhaps disagreeing with the response to the recession, but it seems a bit of an odd comparison. Trump is actively driving things into a negative place due to his erratic policy and the constant lashing out. Obama and Congress were responding to events that began a year before he even took office.
I agree when it comes to credit manipulations. Malinvestment can really occur in any large degree when thereās artificial credit manipulation going on.
The goal should be a stable monetary supply whenever possible.
Not so on stimulus and/or government spending (well- it depends)- 2008 was a true deflationary collapseā¦free market credit was in a real danger of getting into a death spiral. Government invested because no one else was going to.
Yup. TARP was desperate measures for desperate, desperate times. The velocity of money was exactly zero, the finance sector was in real danger of complete free fall.
I donāt think folks realize now just how bad it was and how close to another very real precipice we were.
I was not a fan of TARP at the time, but in retrospect something had to be done to restore even a hint of liquidity.
