Recession: It’s The Cure, Not The Disease

Normal people and businesses know that when they have a shortfall of income, they have to downsize their spending. Villages, cities, counties and states know the same thing. But in the bizarro world of the economist and the American Federal Government, they seem to believe that they are immune from the simplest arithmetic.

Today’s economists are devotees of the theories of John Maynard Keynes. Keynes believed that federal governments can and should print more money and infuse it into the financial system, thereby attempting to control the ups and downs of the business cycle of boom and recession.

Their views are akin to an individual taking out larger and larger loans, over and over, in an effort to thwart a shortfall of income. The debt piles ever higher until the individual’s total income is required to just pay the interest on the debt. Then what? Go get another loan.

What the economists won’t admit is that under monetary policy where the money is backed by silver and gold, there is no such thing as inflation nor a business cycle of boom and bust.

Keynesian economics are unsustainable in the “real world.” However, I understand why economists warm their hands on the Keynes fire. Economists don’t like the clear concept of an unregulated free market. I don’t mean a market with no rules. I mean a market that cannot be manipulated by monetary policy. And “monetary policy” simply means messing with the money supply through inflation.

Remember that only a government that issues money can create inflation. Price increases are not inflation. Inflation is the issuance of paper money in excess of the underlying precious metal value. If you have one silver dollar, and you issue two one dollar paper notes, you just created 100% inflation and 50% devaluation at the same time.

The economy is the host body. Governments are the parasite living off the host. Governments don’t create anything, but have to take something from one to give to another. Governments get their money from taxes. When taxation falls short, they borrow money. And, when lenders slow or stop lending, governments make up the difference by printing bogus money.

The Federal Reserve has flooded the world with trillions of dollars of paper money that has no backing. And the Administration is using this paper money to fund the bailouts we’re all reading about. There’s no chance that these deficits will ever be repaid.

When government bails out a bank, or automaker, or investment house that is failing in the marketplace, it sustains the bad business decisions that caused the failure. It prevents or delays the market from bringing the required discipline and consequence to bear.

In our present world, in which our national currency is manipulated and inflated, we must have the painful recession as a corrective measure. Recession can wring the bad businesses and inflation out of the economy, and return the economy to sanity. But recessions require sacrifice and pain for individuals and governments.

My worldview is that what’s right for an individual is right for a government. Conversely, if an action is wrong for an individual, it’s also wrong for a government. Murdering civilians is wrong for an individual, and is not right for a government because the murderers wear uniforms. In the same way, it is wrong for individuals and governments to issue bad checks to pay their bills.

Bubbles are bursting all over the world…housing, autos, banking and more are coming. But those bubbles distorted the marketplace and now it’s time for them to go away. It’s time for the world…and the American economy…to go through the pain of a recession. If the recession were allowed to occur without interruption and government intervention, it would not last long. But we’re in for an extended recession that may take years to complete, all because politicians and bureaucrats cannot leave the economy alone.

DumpDC. Six Letters That Can Change History.

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