Is the Financial Tsunami Over?

September 22, 2009

Nearly everyday for the past 6 to 8 months there have been reports that the recession is over, or that the recession is nearly over.  I guess I should jump up and go out and purchase a new Lamborghini!

Not My Car!

Lamborghini, Not My Car!

Just last week Federal Reserve Chairman Ben Bernanke announced that the recession is “very likely over”.  He then added, “it’s still going to feel like a very weak economy for some time.”  What does that mean?  Can anyone make any sense of this?  Yes I understand that technically speaking the recession ended for a month, but are things actually getting better?

Things are not getting better, in fact things are about to take a turn for the worse.  The only question is how long will it take for the government sponsored economic masquerade party to end.  Think about it, nearly every positive piece of economic news that we have had in the past 12 months has come from ill conceived government programs that have had the purpose to “jump start” the economy, but have only prolonged the pain.

Clunker...More like my car

Clunker...More like my car

Take for example the “cash for clunkers” program.  This program basically subsidized the UAW and the governments newly acquired possessions of GM and Chrysler to spark the manufacturing sector. This program gave money to people to buy cars, so people bought cars, a lot of cars.  Dealers ran out of inventory, UAW members were called back to work, and manufacturing showed improvement for 2 consecutive months, thus the program was declared a huge success.    Soon however UAW members will be getting laid off again, and manufacturing is once again stalling.  The price tag was $3 Billion, a hefty price tag  to prop up an industry for a few months.   Check out this article at National Taxpayer Union for a more in depth article.

You and I both could  list several other government “prop up programs” that have had short term success only leaving the tax payer flipping the bill.   We have been told that these programs have worked, but have they?   I’m sure you’ve heard the President take credit for bringing the economy back from “the brink”, but what exactly is he talking about, and how can we know that he is right?   They haven’t been right about anything else.

The sad truth is that there are no government programs that can end the economic crisis that we are still facing.  Ever since Wilson started the Federal Reserve, and FDR embraced John Maynard Keynes economic model, we have had a date with destiny.  Keynesian economics is not a perpetual form of economics, it has a life cycle and we are now nearing the end of this life cycle and the Fed and the government know it.

Every time they reach in their magic bag of tricks and pull out a new bail out, or new “cash for clunkers” program they are acting exactly like an magician_hat_200ER doctor getting the defibrillator and trying to shock life back into a dying body.  Perhaps this is “the brink” that the President is referring to.

Is the Financial Tsunami Over?  What do you think?