THAT ONE IS GOING TO BE BAD …
Years ago we wrote a piece in defense of “creative destruction.”
Our column referenced the legendary Austrian school economist Joseph Alois Schumpeter … but then we remembered we were a political blog based in the dumbest state in America. At which point we quit with the Schumpeter-speak.
But the point still stands: Creative destruction is (and always has been) a good thing. It’s a natural part of the free market … and an essential part of creating the conditions for future growth.
In a recent column on his website, investment advisor Lance Roberts makes this point. But he also makes the critical caveat: We are not in a free market. We are in a manipulated market, one in which government-driven centralized “financial engineering (has) had a very negative side effect of deteriorating economic prosperity.”
In other words all those government efforts to “save the economy” have only made matters worse … which is exactly what we said would happen more than seven years ago.
Roberts is arguing the Austrian school perspective … which maintains the best thing government could have done during the recent recession was, well … nothing.
Here in a nutshell, is the problem (according to Roberts) …
The Fed continues to follow the Keynesian logic, mistaking recessions as periods of falling aggregate demand, and they rush to try and stimulate demand hoping to increase the rate of consumption. However, the reason the policies that have been enacted by the current Administration have all but failed to this point, be it from “cash for clunkers” to“Quantitative Easing”, is because all they have done is either to drag future consumption forward or to stimulate asset markets that create an artificial wealth effect thereby decreasing savings that could, and should have been, used for productive investment.
The numbers don’t lie … as we noted in a recent column, America’s gross domestic product (GDP) exceeded five percent expansion in twelve out of thirty years from 1950-1980. In seventeen out of those years, it exceeded four percent growth.
Since then, things haven’t been so hot …
The U.S. economy hasn’t expanded at a five percent clip since 1984 … and hasn’t hit four percent growth since 2000. Hell, GDP hasn’t even expanded at three percent or better in a decade.
Is it any wonder our country is sliding into the ash heap of history?
“The continued misuse of capital and continued erroneous monetary policies have instigated not only the recent downturn but actually thirty years of an insidious slow moving infection that has destroyed the American legacy,” Roberts concluded. “‘Recessions’ should be embraced and utilized to clear the ‘excesses’ that accrue in the economic system during the first half of the economic growth cycle. Trying to delay the inevitable, only makes the inevitable that much worse in the end.”
Which America is about to find out the hard way … (even if the “rainbows and unicorns” crowd would have you believe otherwise).
The good news? As bad as things are, we can turn them around. America has thrived in the past – it can thrive again in the future. How? Easy: We must stop the perpetual expansion of the welfare state, get rid of unchecked crony capitalism, eliminate the radical redistribution of wealth, shut down “compassionate” immigration, end Obamacare and fundamentally rethink the efficacy of waging future “Wars on Terror.”
Do those things and this country has a fighting chance …