posted on Oct, 5 2010 @ 10:08 AM
Are the Austrian too harsh?
Randall W. Forsyth, writing for Barron's early spring 2009, wrote about Austrian economists, "Their ideas warned us of the bubble; their
prescription for the bust is too harsh, however." Now that the NBER has announced that the current "Great Recession" ended in June 2009, after 18
months, let's reexamine this claim. First, the end date clearly indicates that the 2009 stimulus had no discernable impact on either the timing or
the depth of the trough. Subsequent economic activity clearly should cause one to question whether the $800 billion package sped recovery at all.
In fact a better question is the one raised by the Wall Street Journal, in "A Tale of Two Recoveries": Did Keynesian policies do more harm than
good? The Journal, sounding much like Robert Higgs, answers in the affirmative. "Our view is that hyperkinetic government policies have done more
harm than good, leading to uncertainty and higher costs that have undermined business and consumer confidence and slowed the economy's otherwise
natural recuperative powers."
The Journal, then, granting NBER's chronology, contrasts the current recession and "recovery" with the almost equally long (16 months) and severe
(unemployment peaked above 11 percent) recession of July 1981–November 1982 and subsequent recovery. Their conclusion is that the different policy
circumstances significantly explain the drastically different recovery paths: following the trough in late 1982, the economy rapidly surpassed the
prerecession levels of output. But currently, nearly 15 months past the trough, our economy is still significantly below prerecession
After the recession in the early '80s for example the economy was up 8% GPDI just one year after the trough while 11 months after our trough our GPDI
is -21%. So how exactly has the stimulus helped us? Well besides from not helping us at all it has sent many of our currencies into instability and
our debts/deficits to skyrocket leading to financial instability and lack of investment. This has been fealt in Europe especially, but so too in the
United States where our ability to pay off our debts is near impossible without higher taxation which leads to less foreign investment in our domestic
companies which leads to less economic gain and thus slow if any employment and/or financial growth.
The system has been rigged, we have been lied to, there was never any need for a bank bailout, car industry bailout or a stimulus in the first place.
It was just one massive bailout to all of the corporations and local governments which has only pushed us further into the ditch leading to economic
stagnation which has led many in Washington to call for more stimulus, which will only make things worse.
We have been dooped into falling for this stimulus and most of the argument against it was due to people opposing spending when they most didn't
actually realize that it too was a bailout.