Keep the faith: The economy WILL eventually improve, but it will be in spite of Big Government intervention

The American economy is resilient because the American people are resilient.  Our legal system – despite its flaws – rewards innovation, incentivizes invention, and by and large respects property rights.   Most of us have a freedom-loving nature and an entrepreneurial spirit.  Over the last 230 years our country has seen numerous recessions, several depressions, wars, natural disasters, epidemics, terrorist events, booms, busts, etc. and the American economy has painfully muddled through those periods.

This period is no different.  It is more painful and more dark than most generations have experienced, but it is not unprecedented and it is not insurmountable.

The various “stimulus” and “bailout” plans the government undertook were not necessary and have not helped out recovery, but have actually impeded it.  Recovery was already underway when the bust occurred – the bust was the first step in stopping all of the insane practices that cheap-money fed lending has brought about.  The stimulus and bailouts have prevented the adjustment from happening more quickly by propping up businesses that should otherwise have gone under or been restructured or sold to efficient operators much more quickly.  But there it is . . . no use dwelling on things no longer in our control.

The acceleration in job losses was the inevitable response to the excesses of the tech-bust/post-9.11 stimulus.   Loose money lending  led to a debt binge that not only saddled many individuals and businesses with too much leverage, but also led to a misallocation of jobs and resources, so that people were employed in short-term projects (i.e. an excess of housing-related projects that were not sustainable long terms) and capital was deployed into companies that did not have long-term prospects (again, primarily housing related businesses, mortgage companies, etc). The only way through this is for capital and people to migrate to industries with real, non-artificial demand, and for the debt burden to be worked off, whether by paying it down or through defaults.

The artificial boom led to an inevitable bust which resulted in dislocations in nearly every market.  We’re all feeling it.

The hangover is proportional to the binge.

Government’s penchant for bailing out their Capitalist Cronies meant that bad behavior was rewarded for many, and many whose behavior was unimpeachable have been handed the tab and punished.  But there’s no crying in baseball.  Politicians and governments have been corrupt since the dawn of man.  It’s no different now.  In 1,000 years – don’t worry, we’ll all be gone by then –  it will be no different.  The key is to understand this and just do your best to combat it.  We aren’t called upon to win, we’re called upon to fight.  By fighting we ensure that the injustices are less than they’d otherwise be.

It is true is that the American economy – and it’s citizens relationship with government – is forever altered.  The policies undertaken have slowed recovery and set a horrible precedent – that bad behavior will be bailed out and good behavior will be punished by coercing responsible parties to underwrite the bailouts for the irresponsible ones.  The actions that were undertaken have undermined prosperity in the long-run, and we’ve kicked the can for future generations to deal with.

But will the economy eventually be back?  Yes.

It will be back in spite of the actions undertaken by government.

Who will lead the economy back?  Small businesses have led the recovery in the last seven recession, according to the Kauffman Foundation.  Just like most every other time it’s happened, it will be the people in the economy providing the goods and services in their communities.  It will be led by small businesses, by the people who, when they either lost it all or faced that prospect, got up the next day and went about figuring out how to create value in the world. People will buy and trade service and goods that are needed to improve the standard of living.  You will continue to work each day to better the lives of others.  And others will work to better your life.  You will, in a free market, find one another and be blessed by your trade.

If you were in an unsustainable – boom induced – line of work, you’ll migrate to another line and hopefully not one of those that will be artificially created by the new round of stimulus;(for example, some of the “green jobs” that have been artificially created by Big Government, which are resulting in new resource misallocation and are where the new “bust” will likely occur… however, green jobs that are market driven will be OK, those driven by real demand and not by government mandate.

When the recovery eventually occurs, AND IT WILL, Big Government will try and take credit.  However, you will know that that’s like trying to take credit for the sun coming up.  It was going to happen anyway, in SPITE of the obstacles big government laid in the way by preventing the economy from naturally correcting itself, and would have happened much sooner if Government had left worse well-enough alone.

Good will come of this.  If nothing else, people, more than ever, have been alerted to the fact that Big Government cannot save them.  Government is just a group of people who are no more competent or benevolent than any others (and, in fact, are largely less benevolent and competent than your average American citizen).

If nothing else comes of this but people learning to avoid the excesses that come during cheap money and credit booms, something good will have been learned.

If nothing else comes of this but the ability to audit the fed, and thereby begin the process of preventing future cheap-money booms (that lead to these busts), some good will have come of this.

As small business owners and employees this is a painful time for us, but it’s not the end.  It’s a beginning.  It’s a time to fight, a time to save, a time to innovate, and a time to recommit to the ideals of a free people.  It’s a time to condemn tyranny and waste wherever it’s found.

It’s a good time to be alive.

And just don’t forget – when things turn around, and they eventually will, it will be because of the efforts of people like you who, in spite of the obstacles of Big Government, will overcome and prosper again.

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One Response to “Keep the faith: The economy WILL eventually improve, but it will be in spite of Big Government intervention”

  1. Susan Hank Says:

    A great piece. Well said and I love the optimistic tone. Thank you for brightening my day.