Thursday, June 2, 2011

The Double Dip is Upon Us

As you know, for a while I have been very doubtful about this recovery. The government figures were great. Unemployment was finally starting to fall and home prices were at least starting to steady. But then came the news yesterday that home prices in major metropolitan areas were starting to fall again, and today the news came that employment numbers were bleak. This double dip is on.

But how could this be? Stimulus and TARP were supposed to be the answers. Without TARP, our economy would have fallen to shambles, and without the stimulus programs, spending would have fallen and destroyed the economy. Let us not even imagine what would have happened had we allowed devaluation to prosper and did not engage in quantitative easing.

The only reasonable conclusion is that the public was swindled. TARP was not necessary. Stimulus was not necessary. Quantitative easing was not necessary. Even Cash for Clunkers was not necessary. Speaking of Cash for Clunkers, look at what has gone on in the used car market. has posted about this problem many times. This post I believe explains the problem most clearly.

And if it happened to Cash for Clunkers, should we not expect the same things to have happened for these other programs? Is it any surprise that the price of gas is starting to rise? Is it at least possible that trying to stimulate demand and devalue the currency resulted in higher prices for most goods? We raised demand and provided a greater supply of money. Why should any of us be shocked by this?

This recession has been going on for years now, and it looks like it is only going to get worse. Stimulus and TARP and quantitative easing propped up those businesses that should have failed. We have capital being squandered by companies that have no right to be holding onto it. By giving money to those that ran their businesses into the ground, we effectively hurt those businesses that knew what they were doing. The housing market should have shrank. Instead we lent it more money and tried to get it to grow. We are not allowing our economy to correct to the demand of consumers. Until that happens, how can we ever expect to grow and see employment rise? Until we stop trying to fix the problem, the problem will not be fixed.

Related Articles
Private Sector Job Growth: Before and After the Recovery
Whom Should we Blame for High Gas Prices?
Why is the US not Growing as Fast as it has?
Inflation is a Problem and it is Here Now


  1. But...but...but paul Krugman, the Nobel laurate economist say the stimlus failed because it wasn't nearly big enough. Gwaaaaa!

  2. It's the same excuse they use every time their plans fail. It's how they explain why FDR couldn't fix the Great Depression, why Nixon and Ford couldn't get us out of Stagflation, etc. It's never enough.

    Maybe, just maybe, they need to realize that their plans are based on bad theory. But I wouldn't expect a learned academic to ever admit fault. Too much pride there for that.

  3. 2008 was a beautiful opportunity for the United States of Crony Crapitalists to meet up with some Schumpeterian Creative Destruction.

    Instead, George Bush let Dirty Hank Paulson and his gang of pirates blow a hole in the side of the treasury and go on a looting spree that put the Rodney King aftermath to shame.

    Keynesianism has never worked, but the insane want to keep trying...

  4. 50% of the created jobs came from McDonalds. Now that's pathetic.

  5. I had no idea. Well at least they're still doing well. Someone needs to provide jobs.

  6. Hey Tony, I like your blog very much. You have good point of view...

    Cheers, Paul

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  7. Thanks for the approval, Paul. Keep reading, I try to keep this blog as current as possible.

  8. The only thing the Obamunist stimulus package stimulated was big government, unions, and a lot of financiers who should have forced to face the consequences of their decisions.

  9. No doubt. The stimulus was all about corruption and kickbacks, and actually stimulating the economy was second. Besides, the thought that it would actually stimulate economic activity is based on faulty economic understanding.

  10. Doesn't Bernanke call himself a libertarian monetarist? what's the difference between monetarism and Keynesian? Would you call Greenspan's policies Keynesian or monetaristic?