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.