Why We Should Still Be Worried about a Double-Dip Recession

Reader Comments
Back to blog

Keynesian economics would argue that is was MASSIVE government spending (to finance the US war effort) in the early 1940's that ended the Depression. Is this incorrect?
In your view, what needs to be done to end today's Depression?

pimaCanyon of AZ 3:59PM January 31, 2013

Well said except one mistake, compromising the truth about the monetary contraction early in the Great Depression, perhaps out of lack of rigorous study on the subject and so much misinformation. In fact, if one goes back and studies the numbers, there was no dearth of either monetary or fiscal intervention. The issue was the, as Mises predicted, there is always a bust as a result of the artifical boom created by an expansion of money & credit.

GWK of CA 1:56AM March 05, 2012

We all hate pessimism, yet in an economic 'system made to fail' - the fractional reserve banking system - it's never possible to pay down the debt simply because as the debt Is paid down the money disappears into thin air and the money supply reduces accordingly. Money is actually only "created" by new debt and as that debt is retired, so literally is the money. That's why monetary reform involving competing currencies is ultimately the only available solution. Switching to competing currencies gradually and fazing out the fractional reserve system isn't wanted by the current bankers of course, so we can begin to see the issues. This will come to an impasse during the approaching decade or two - the way we are going - simply because the GDP to debt ratio has gotten high enough to be unsustainable mathematically during that time period, and the impact on the people will come according to whom is making the new economic arrangements. Everyone is anxious about it and hardly anyone knows how to proceed. Yet real and effective changes Can be made that will safeguard the people, but naturally there is an entrenched resistance to such reforms. It's eerie looking into an uncertain future with very likely unintended consequences inherent in any or all remedies, but like FDR phrased it "there is nothing to fear but fear itself". Life will go on and the genuine economic recovery will eventually come to pass - but it's really come time now that we attend to it - and electing Ron Paul is by far our best bet during the coming transformations. It's not a good idea to keep going like we are until hyperinflation brings a much worse result. There will be difficulties regardless of how we proceed, but less so the sooner we assume the financial responsibility of forming a stable currency. Freezing the GDP to debt ratio with Ron Paul's budget proposals will give some stability to the currency for the short term and allow us time for necessary monetary reforms. Making valuable goods [as we used to do in days gone by] to trade for currency that has an intrinsic value is the right formula for prosperity.

John of NY 10:52PM February 29, 2012

Rising rents, fuel, food, gold, crude. All in a consumer economy. I am having sleepless nights fearing how this collapse/inflation/hyperinflation is going to play out. And the TV and MSM keep telling us the economy is taking off again. We are finished. The middle class is finished. This country is going to slip into being what second world used to be, and second world will become third world, and third world wont notice much. Its over. Game over man.

Mick Russom of CA 12:57AM February 29, 2012

"dominant mode of deflation prevails until debt is destroyed" makes sense in that as debit is being destroyed the central banks are printing replacement - the dog is chasing its tail and going nowhere. Unfortunately the continung burden is a wealth transfer from the poor to the 1%.

Bob 10:12PM February 28, 2012

Just raise the interest rates on banks already.

Dzil of AZ 5:47PM February 28, 2012

We will have another downturn, guaranteed. Why? Debt. Depressions are caused by too much debt. What is the govt trying to do about it? Borrow to stimulate. Wrong antidote. We won't be through this period until the private and public debt is washed out. By payoff or liquidation. Mostly by liquidation. The piper is about to be paid for congress's deficit spending and lax lending rules the last 40 years.

jim bickle of IL 4:19PM February 28, 2012

Everything that is wrong with the country can be boiled down to production.
Until we start producing things of value, we are not going to recover economically. We can slap bandaids on the economy, move money around in a shell game, and spout figures to placate the masses, but until the United States begins PRODUCING, nothing is going to change. All the banking shenanigans that created money from valueless sources are not going to keep us floating along for long and the government creating debt to combat debt without ever addressing the fundamental issue of 0 production is just going to dig the hole deeper.
Of course, those at the top of the trash heap that is America would do well to realize that those on the bottom are the ones creating the support and are liable to go French Revolution on the oligarchs if given enough incentive.

Molly of VA 11:13AM February 28, 2012

Wow! This was the most illuminating piece I've read on this subject. Thank you!

bazz of TX 3:26AM February 28, 2012

Confidence in the currency will bring the first 'real' uptic in the economy. If you have time, please get to understand the fractional reserve banking system and then the essentials of Keynesian economics and it can be grasped. The first step is in balancing the current year federal budgets to put confidence back in the currency. The next step is careful but real monetary reform. Recommended reading is "The Creature from Jeckyll Island" to get a grasp of our banking system and how money comes into creation. Also, "Zeitgeist the Movie" - for example - is a good documentary and will show why we must be quite careful about the money supply when the federal budget is balanced and possible ways of approaching it. There are books on these topics or videos on the internet in youtube for instance.
Our next president should have a sound understanding of economics, and really only one of the 5 running for it this autumn has any grasp of economics and that is Dr. Ron Paul. He undertands the full picture and cares about the people. Trust.
In liberty.

John of NY 6:35PM February 27, 2012