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. Mises.org 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.

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