Obi-Wan Kenobi
/ 178.36.3.* / 2010-04-12 16:01
It is the failed policy of replacement of private demand with government deficit, thereby hiding disappeared private final demand with government subsidy not from surplus (which would work temporarily) but rather from borrowing, that led to the last jobless recovery, and will cause this one too.
It is the government's interference in the necessary adjustment process - that is, the prevention of those who were imprudent from suffering the consequences (specifically, bankruptcy) that leads to an economy with too many consumers, too few producers, and a gap between the two that is not closed by market adjustment but rather papered over.
Government cannot bring prosperity to the people. It can only get in the way and interfere with that prosperity, or get out of the way and allow the market to work.
When the economy is overburdened with debt, as it is now and has been since 2000, piling more debt into the system via whatever means you concoct does not lead to prosperity. It leads to false economic signals that are then picked up by participants in the marketplace, who then make poor decisions based on intentionally false and misleading data that government promulgates.
That in turn leads to malinvestment, otherwise known as "bubbles", which then burst, releasing the held-back damage into the economy, multiplied by the compound interest that has accrued in the interim!
The longer and more-energetic the interference is, the worse the malinvestment and the larger the blast when the bubble bursts.
We're creating a disaster here and now, and just as happened the last time when this one hits we will get to hear how "nobody saw it coming."
Well, some people did see it coming - both the last time in 2000, and this time here and now, and some of us, today, are tired of hearing how "nobody knew" and "it wasn't foreseeable" and instead are choosing to sound the collision alarm - before the impact with the iceberg occurs.