I'm no economist but I think we are seeing something I have long suspected...

[El Pinko]

... that recessions and depressions CANNOT be prevented.


For years and years, I have heard the free marketers spout the gospel that the only reason the 1930s depression and the 1981-82 recession were so severe was that the government turned the spigots off when they should have turned them on, and that we could grow ourselves out of the next bad one by just opening up the coffers.

Well, Helicopter Ben has been tossing wads of cash around for nigh on a year now, with interest rates low, and now a hefty present for the bankers and the Chinese, but still the dominoes around the world are falling.

I've always suspected that houses of cards will always fall, whether you have the vacuum cleaner set on "suck" or "blow"...

[slipslidingaway]

1. It Ain't Gonna Work - TIM W. WOOD

http://www.financialsense.com/Market/daily/friday.htm

"By every historical measure the equity markets slipped into a secular bear market in 2000. As a result, we began to see efforts by the powers that be to keep the market afloat. I have stated all along that manipulation will ultimately not work. I have also stated all along that all this will do is make matters worse in the end. Well, I would think that everyone can now see, matters are indeed much worse. Yet, the Fed, the Treasury and the politicians continue to think that they can “fix” the problem by throwing more money at it. They do not understand that they can’t “fix” this economic crisis. They also do not understand that it is their trying to “fix” things in the past that has created the current situation. All markets as well as the economy must both inhale and exhale. They are trying to prevent the exhaling and it ain’t gonna work.

What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit..."

[Warpy]

2. Sure they can

Communist economists have long noted the cyclical nature of capitalism, the boom and bust cycles that occur with depressing regularity. You can't set a clock by them, but you can set a calendar by them.

This particular bust was delayed about 25 years due to the policies of the New Deal. Only when that was dismantled did the cycle have a chance to reassert itself, and it's done so with a vengeance.

Keynes gave us the tools to escape the cycle. The problem is that the wealthy grow restless because they're not getting wealthier quickly enough and buy politicians in order to dismantle all the safety mechanisms.

Economics is not an exact science, and even Keynes could stand tinkering. However, abandoning his principles is what has led us to the present sorry state of affairs with the supply side choked and the demand side starved.

[RoyGBiv]

3. Spigots ...

One of the problems is that when you turn on the spigots, all you're doing is creating a temporary moment of breathing room where you can do other things to attempt to repair the underlying problem. (That would be that big, bad, nasty "regulation" word.) All that has been happening so far is pumping money into the system without addressing the problems themselves.

Hoover, for example, did open up the cash flow just a wee bit, but he took the wrong lesson from it. When things improved mildly, he called it victory, didn't do anything about the real problems, and then effectively discontinued the only program he had that was doing any good at all (the RFC). Voila' -- Crash.

[bean fidhleir]

4. Good call. It's a pump, and shifts wealth from our pockets on both the rise and the fall

Capitalism is a pathological system and there is absolutely no way to keep it from being harmful to most people. That's its very nature.