The standard refrain this week was pessimistic. A quick return to the economic mantra of health, which was popular not so long ago, disappeared faster than you might say, licentious. But this week there was one noticeable surge. In fact, one of the leading economists made assurances that renewed prosperity is yet to come.
On Wednesday, Nobel economist Paul Krugman broke away from his liquidity trap charts long enough to tell Noah Smith: Bloomberg that the economic downturn 1979-82 “Would suggest a quick recovery after the virus is contained. I see no reason for years of depression. ”
That sounds great, that’s all. A quick recovery would put an end to financial pain and suffering. However, we seem to think that the damage caused by the government block will have long-term consequences.
The magnificent climb of the concave parabola of government spending and debt will not disappear. Over the past four months, the budget deficit has grown by leaps and bounds – almost $ 3 trillion. Government debt – currently over $ 25.6 trillion – has overtaken the economy.
Moreover, deficit spending is financed by a Fed loan created out of nothing. Again, for this type of depravity there will be lasting consequences.
Currently, the economy and financial system are in a difficult situation. This is not cyclical depression, despite what Krugman says. This is a complete social collapse. And the authorities cannot stop it.
Since Nero cut coins in 64 AD and fiddling with burning Rome, there wasn’t such an unbearable collection of scum in the imperial office. Plans are not prohibited: mass surveillance. Constant wars. Market intervention. Trade wars. Great state control. You name it.
Yet these weary solutions are a source of problems …
Decisions and corrections
Authorities may not be able to stop the depression. But they can try; it is in their interest. However, their efforts will serve to further confuse.
You see, the economy can and will recover from a growing depression. Although it could take a decade or more. In addition, the intensity and duration of depression depends on the level of ineffective government. So far, mismanagement has been wonderful.
Locking may have helped smooth the curve. But what did it really decide? The virus is still free. People are still getting infected. However, thanks to the closure, the economy was also destroyed.
From one solution, a new problem arose. And fixing this problem caused another problem. Etc…
Economists at the university of chicago estimate that more than two-thirds of unemployment insurance workers receive more unemployment benefits than at work. Some even carry two to three times more.
The $ 600 weekly unemployment benefits provided by the CARES Act have been a great benefit to many unemployed. These weekly payments also give the government an incentive not to work. This, in fact, delays economic recovery.
Government resolution of the consequences of government blockage has become part of the problem. But don’t worry. The government is ready for a new solution to solve the problem of its creation.
Take, for example, Senator Rob Portman. He offers a weekly bonus of $ 450 for returning to work. The purpose of the proposal is to encourage people to return to work by giving them free money. Larry Kudlow believes Portman has a good idea. According to Kudlow, this is something. the White house is an “Very carefully.”
What else are the White House and central planners looking at? What other unrest will make their decision? A few come to mind …
Unlike the Great Depression, where there were massive bank failures and a collapse in the money supply, the Fed is engaged in the mass printing of money. The Fed’s balance was $ 4 trillion when Fed Chairman Jay Powell rang the New Year. Now it is more than 7 trillion dollars … and by the end of the year it will reach 10 trillion dollars.
This policy of depreciating the dollar generates an endless assortment of economic distortions. Since money is losing value, the results can be very different. Prices change and fluctuate in a strange and unpredictable way depending on the mass psychology of people.
Will financial assets grow like they did after rescuing 2008-09? Or due to the fact that people get free money, consumer prices will rise? Will all free money lead to an economic boom? Or will the economy stall as inflation rises in a stagflation swamp?
The fact that all this happens in an election year raises the stakes. As the campaign warms up, followed by debate, advertising, and party agreements, the proposed solutions to the economic problem will range from extreme to absurd. You will not hear mention of freedom, liberty, honest money, and small government … unless you go here,
But it will be very pleasant to observe if the results were not so destructive. Here’s a preview of what should happen …
Two hominids, breathing heavily at a watering hole, calling each other names, tweet insults, scream and scream at someone who will share and give out peanuts. Everyone wants to transfer wealth from the rich through payments to the poor. Another wants to restore the destroyed airports and bridges of the country, using money from somewhere.
However, people, after months of blocking, do not want to hear this. As the weather heats up and the economy cools, tension escalates. In Los Angeles, riots broke out in Minnesota. But you haven’t seen anything yet …
This is a complete social collapse. Racial injustice can be a rage today. But there are many other injustices that make people go crazy. Undoubtedly, by August weekdays, when the weekly $ 600 unemployment verification program expires, the unrest will approach the goal near you.
After that, everything will become really terrible.