Economy will recover despite government efforts

"Recessions don't peter out in 10 days, of course. But they do eventually end, with or without central bankers' help. According to the National Bureau of Economic Research, the US went through 32 recessions between 1854 and 2001, the average duration of which was about 17 months - or a few months shorter than the current recession, so far.


"Even a severe downturn can be followed by rapid recovery without aggressive central bank intervention. In the 1921 recession, wholesale prices, industrial production, and manufacturing employment all fell by 30 percent or more within a year. Yet by early 1922, the US economy had recovered fully from its mid-1921 low. What's more, it did so with no help from the Fed, which was determined to let the recession take its course, so as to hasten the restoration of the prewar gold standard.

Bernanke, in contrast, has been praised for taking bold, innovative measures to tame a supposedly unprecedented economic collapse. But his innovations included errors of both commission and omission that almost certainly deepened the recent downturn, making it last that much longer."

My take: As I have argued earlier, politicians rush to take ameliorative action early in recessions not to end the recessions but to position themselves to take credit for ending the recessions. They hurry because they don't know when the recessions will end through the normal workings of a free economy. Just as they are loathe to waste an economic calamity, so are they loathe to waste the return of better times.

The only departure from the pattern by the Obama administration lay in its resort to fascist policies, such as the takeover of General Motors and Chrysler and its unparalleled spending. If the past is prologue, the administration's self-congratulation will be unusually loud and especially offensive.

Chances are that economic historians will find that the frantic anti-recession efforts worsened the recession, as President Franklin Roosevelt's policies did in the early 1930s.

Markets work, but liberal politicians don't want to acknowledge that fact.

Look for recovery in May, history suggests

Using calculations as baseless, reckless, self-serving and hare-brained as those used by politicians in their short-sale of America's future, I can now make a fearless prediction.

The recession will end.

I have no idea when it will end, and neither do the politicians.

I have, however, consulted the recent play-by-play recession analysis prepared by Reasononline and have concluded that national administrations and congresses vary greatly in their grasp of recession politics.

First, bear in mind that the real objective of politicians at times of economic difficulty is to enact remedies shortly before recessions end, so the politicians can claim credit for having ended them.
On three occasions since World War II, the politicians have nailed it by enacting recovery legislation in the same months as the recessions were later found to have ended. In October, 1949, durng the Truman administration, Congress acted to end an 11-month recession. In April 1958, and again three months later, during the Eisenhower administration, Congress acted to end an eight-month recession. In March, 1975, in July, 1976, and in May, 1977, during the Ford and Carter administrations, Congress passed bills intended to end a 16-month recession.

Following up on the Eisenhower administration's bullseye, the newly seated Kennedy administration was a little slow on the draw. In May, 1961, it pushed through recovery legislation to end a recession that was later found to have ended in February.

In August, 1971, the Nixon administation goosed the economy nine months after the recession had ended. Critics were merciless in those days. Nixon subsequently resigned to stave off impeachment.

The Ford administration rebounded, nailing a recovery that started in March, 1975. The recovery was so becoming that the Carter administration was still getting into the act in May, 1977, whcn it goosed a recovery that had started 26 months earlier.

In January, 1983, President Reagan won enactment of recovery legislation for a two-month recession that had expired two months earlier.

The first Bush administration was slow on the draw, moving in December, 1991 against a recession that had ended 10 months earlier. The second Bush administration did better, declaring war in June 2001 against a recession that dragged on for five more months.

Here's the good news. Given the fact that the politicians have missed recession endings by a total of 29 months, over eight episodes, the average miss is only three and a half months. Despite the dire, even apocalyptic, warnings from President Barack Obama's camp, look for things to start looking survivable in May.

Addendum: for those who are unversed in economics and finance, a short sale is the sale of an asset one does not own in the expectation that it will be worth less in the future than it is now. In enacting Obama's stimulus proposal, that's essentially what the Democrats are doing to America today, saddling the generations that follow with an economy crippled by debt and controlled by socialists bent on controlling American citizens as never before.

http://reason.com/blog/show/131636.html