PrintApril 14, 2010
The Recoveryless Recovery
The president, the left-hand majority of the media, and the Democrat political leaders are all trumpeting about how the recession is over. They say that employment will recover soon, that employment is a lagging indicator. Since they all speak with one voice, let's just call them, as a single entity, the Blob.
The Blob fails to mention that nothing is recovering except the banks and stock market.
So let's explore these two issues of supposed recovery.
1) The banks are recovering because the government continues to pump money into them. The Blob insists that the banks are paying back the TARP money, making a big profit as well, and that "there's nothing to see here." But is this really true? Where are the banks getting this money? Most of it is not from banking.
The Fed creates money from thin air and loans it to the banks at less than 1%, who then loan that same money to the Treasury. The Treasury pays more interest than the Fed charges, so this is a stealthy way for the government to simply give money to the banks for doing nothing. This is a simple handout: money for nothing. The cherry on top is that the Treasury gets money to continue spending like a drunken sailor without increasing taxes. OK, my apologies to drunken sailors.
Secondly, the TARP money the banks are paying paid back to the government is going to still more government spending, and not being used to pay down the debt, or even the interest on the debt the treasury incurred to obtain that money in the first place. This money is not unlike a big slush fund.
The Treasury spends this money, and this is supposed to "stimulate" the economy. Unfortunately, simply spending money doesn't stimulate anything. To stimulate, one must apply money (or tax breaks) to a specific activity. If anything, the only stimulus actually taking place today is the one being given to the banks. It is helping them make huge profits.
If the banks didn't recover, as they are being (what amounts to) given billions of free dollars, they would really have to be incredibly stupid. That all these profits cause big bonuses for the banks executives is logical, if embarrassing for the Blob. Perhaps it is God's sense of humor showing -- when you are caused embarrassment when doing something wrong.
2) According to the Blob, stock market prices being up is proof that the economy is recovering. This is an interesting application of reverse logic. What is really happening is that the dollar is losing value, much because of the Fed and Treasury flooding the market with dollars, as shown in item #1 above. It simply takes more of your dollars to buy a portion of a company -- a share.
Because there are so many more dollars in the system, the price of things (in dollars) is increasing, but the value of these things is not going up. This is inflation, not prosperity. The Blob covers this up, claiming that it is a sign of improvement when it is quite the opposite. There are no signs that the economy is improving unless you look at very narrow aspects: the banks and price of stocks. Most companies are making little profit, and many are still trimming their work forces. Commercial real estate is teetering on the brink of collapse, and home sales are only up due to people dumping overpriced homes in "short sales" where the bank agrees to lose money.
The Blob has spoken. This is a new era -- the era of the Recoveryless Recovery.
