Friday, April 01, 2011

Double Dip is a Lie

The failure of the economy to recover after the collapse in 2007 has become so evident that nobody can deny it any longer. This creates an interesting dilemma for Keynesians who have spent the whole time since Obama was sworn in predicting an imminent recovery.

It is true that, due to a quirk of accounting, technically the recession ended already. Government spending shot up in response to the downturn. Unfortunately government spending is included in the GDP, so therefore the GDP went up as a result of government spending increasing faster than the rest of the economy was declining. Since "recession" is defined as consecutive quarters of economic decline, any increase in GDP is considered to be the end of a recession.

Unlike "recession," the term "depression" has no exact definition and is usually considered to be enduring high unemployment. This has enabled mainstream economists to deny that the economy of the United States is in such a state due to the ways unemployment is disguised by government employment.

But using the government to artificially inflate the economy is highly unsustainable. At best it is temporary; at worst it makes the economy far worse due to the attempt. The current situation is not “at best” and the economy is rapidly deteriorating.

Since the economic signals are so bad that it is becoming impossible to ignore. That is why all economists dedicated to the mainstream are calling it a “double dip”. Those on the right side of the Keynesian spectrum are blaming Obama, while those on the left side of the Keynesian spectrum are blaming Bush.

Libertarians know that it is not a whole new recession. They know that it is a continuance and a worsening of the current plight facing the United States economy. For tactical reasons it is important to correct everyone who says that this is a whole new economic downturn.

1 comment:

Thomas M. Sipos said...

Just today I heard glowing news reports on the radio that we're out of the recession.

The basis for this claim was "jobs growth."

Yet in their guts, I think most people "feel" that we're still in deep economic trouble.