Tag Archives: recession


Will he or won’t he, no one but he knows; however, president Obama is very capable of letting the economy fall over the fiscal cliff.  After all, it would mainly affect old white men because it’s old white men who own stocks and engage in private enterprise.  The Republicans would be to blame for the economic collapse due to their obstructionist policies designed to return the country back to the horse and buggy days rather than progress Forward into Obama’s New America.

Remember, the modus operandi of a community organizer is to gain power by taking advantage of a crisis.  Then Saul Alinsky taught that, if you can’t find a crisis, make one.  Remember also the answer Obama gave when an interviewer suggested that the consequences of raising capital gains taxes might be a loss of revenue.  The simple answer would be “I don’t believe it would.” but that’s not what the president said.  He said that spreading the wealth around was worth the cost of a little lost revenue.  That reply revealed where his priorities lie.  Add a dash of “Never let a crisis go to waste” and you have a formula for a return to economic recession.

The free market system results in unequal prosperity but that beats socialism which leads to equal misery.  Or as another wise man said “You can’t make the poor rich by making the rich poor.”  It’s too bad the president doesn’t know that.

Post script: However, you can make the poor poorer by making the rich poorer.


Krugman may be a Progressive political advocate posing as an economist but when Krugman is right, Krugman is right, well partly. In a recent Op Ed piece for the Times he writes “Default Is In Our Stars”. His thesis is that excessive debt played a key role in the creation of the current financial crisis and that reducing debt to reasonable levels by curtailing spending puts a damper on the economy. That much is correct.

He didn’t exactly say debt, he said personal debt. I don’t think he considers government debt to be debt. Having started his piece by saying (personal) debt was a cause of the crisis he then says “A naive view says that what we need is a return to virtue: everyone needs to save more, pay down debt, and restore healthy balance sheets.” That is naïve?

Our Nobel winning economist has been calling all along for the government to go deeper in debt on another stimulus plan. Now he is calling for consumers not to save and not to slack off on their spending. In other words, to remain over-extended. That idea would push the problem further down the road and deepen it. Then what of the future?

It has long been my opinion that those on his side of the political divide are given to short term thinking. Give a hungry man a fish and the problem of hunger is solved. If he is hungry again tomorrow, give him another fish. Meanwhile, condemn the fisherman for trying to gain from his work. If the supply runs out…..no never mind that, the man is hungry. Just give him a fish.

Krugman’s solution – “In the end, I’d argue, what must happen is an effective default on a significant part of debt, one way or another.” What is default? It is a broken commitment. It is passing the cost of ones spending onto someone else. It is the liberal solution. And “one way or another” is an example of not thinking something through to its consequences.

The default could be implicit, via a period of moderate inflation that reduces the real burden of debt; that’s how World War II cured the depression.” Huh? It was inflation that cured the Depression? He could not have meant that it was WWII that got us out of the Depression, not FDR; that’s an observation only made by Conservatives and denied by the Left.

Let me see, do I have this right? What the nation needs now is is continued high levels of personal debt, less personal savings, more government money spent on stimulus programs, which means a higher level of government debt, and a return of inflation. It makes me proud to say I do not have a PhD.

Here is a link if you want to read the article.


Contained in every recession are the seeds for its own recovery. It is a little known fact, but true, that prior to the 1930’s the government did not intervene in recessions. The economy was left to heal itself which it did very nicely. Such an approach, call it a non-approach if you will, is not feasible in today’s electoral Democracy. Given that constraint, what should government do?

Stimulation needs to be focused on the private sector. It is the private sector that’s in recession, not the government. Jobs added to the private sector are a boon to the wealth of the nation. The cost is relatively small, with emphasis on the “relatively” of course. A few one shot injections and a modicum of patience is all it usually takes.

One such injection was used by both John F. Kennedy and Ronald Reagan was to open a 2 year window during which business could get quicker tax write-offs on new plant and equipment. Inasmuch as it was a temporary benefit the response of business was quick. The immediate cost to the government was zero. The long term outlay by the government was zero. The only thing that changed was the timing of the receipt of revenue. That is the sort of thing government should do.

Most important of all is for the government to get out of the way and let the recovery begin.

Don’t expand the government sector. The government sector is never in recession and does not need “stimulation”. Do not encourage the destruction of usable personal property. When many people are out of work it is not the time to reduce the supply of goods and increase the cost of living. Roosevelt ordered the slaughtering of thousands of young pigs, Obama paid to have serviceable used cars destroyed. Roosevelt’s avowed purpose was to raise the price of pork. Obama’s purpose was not to raise prices but used car prices have risen as a normal consequence.

The most dangerous thing a government can do in the midst of a recession is to raise taxes. Raising taxes, even a little bit, during a recession risks depression. Raising taxes substantially increases the risk proportionately.

Two other weapons government can normally use to fight a recession are lowering interest rates and lowering taxes. But taxes are already low and interest rates are near zero. On both the fiscal and monetary fronts, we are out of ammunition. Only an external event, a change of administration or the passage of time will lead us out.


We have noticed some recent headlines and comments that indicate the business world is beginning to understand the Obama Administration.

“Companies are turning in healthy profits, and are sitting on a record-breaking pile of cash — nearly $1 trillion and growing.” They are reluctant to invest in growth until the the content of new laws becomes clear.

“Ben Bernanke said last week that there is “unusual uncertainty” about the nation’s economic outlook”

“This is not an environment that encourages spending and commitment,” said Howard Silverblatt, a senior index analyst with S&P.”

“These are fundamental concerns,” said Goldstein. “There’s a reason why businesses and consumers are nervous about where we are, and where we are headed”

“Finance Overhaul Casts Long Shadow on the Plains” Farmers are coming to understand that they may not be able to hedge their crops under the new financial reform laws.

“Morgan Stanley Says Government Defaults Inevitable”

Warren Buffet and Bill Gates were strong supporters of Obama when he was running for office. We have yet to hear from them.


Recessions are a natural element of the economic cycles in a free market society. They even serve a useful purpose. Recessions put a damper on the irrational exuberance that leads to boom and bust. Recovery from recession is just as natural as its recurrence.

MOTHER OF SEVEN Photo from FDR Library via National Archives and Records Administration

Since the end of the Great Depression the average length of a recession has been 11 months; the longest was 16 months in duration. The National Bureau of Economic Research is the universally accepted arbiter for determining when these periods began and when they ended. The NBER has set December 2007 as the start of the current recession. That makes it 2 years and 9 months old. It is by far, the longest recession on record.

Banks have cash to lend, corporations are flush, interest rates are low, labor is plentiful and cheap. These are the seeds for renewal of growth that naturally occur in any recession. But they are not taking root. It is the herbicidal policies of the Obama Administration we have to thank for that.

Taxes will rise but the details remain unknown. The rule of law has been subrogated to executive dictate. Assets have been acquired by government through intimidation. Unions are supported by government as seldom before. Obamacare has significantly increased the cost of adding new employees to a payroll. The Dodd and Frank Act for financial reform has given regulators carte blanche to make the law, no one knows what’s in store. Cap & Trade and Card Check hang as specters for 2011. The Federal debt is set to soar. Socialism is knocking at the door. There is no need to wonder why business is not rushing to expand and banks are reluctant to lend.

The collapse of the mortgage industry brought on this recession. It was the Community Reinvestment Act (CRA) and the actions of the government sponsored enterprises Fannie Mae and Freddie Mac that fed the real estate bubble which, one day, simply had to burst. It was Andrew Cuomo, Secretary for HUD who threatened the banks because “only” 42% of their loans were to sub-prime lenders. This was not a naturally occurring recession. It was government induced and now it is being government prolonged. It is FDR redux.

What did Reagan say? “Government is not the solution to the problem. Government IS the problem”.

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Rush Limbaugh took a lot of flak when he said of Obama on Inauguration Day, “I hope he fails”. Bombastic, irreverent, self aggrandizing though he is,  Limbaugh is worth a bit of one’s ear because, for insight, he has no peer. Many are the times I have dismissed his presumptions only to see with the passage of time his vision was correct.

To wish Obama continued success is to wish for more of what he already has done. He has subjugated the rule of law to the will of his own. He has dictated private property be diverted from the hands of its rightful owners to be given to labor unions having no legal claim on the assets. We have seen the creation of powerful czars who report to no one but the president. We have seen limits set on executive incomes in private industry at the whim of Obama.

We have seen Senators brazenly bribed to change their votes in order to enact legislation the American people clearly and fervently made known they did not want. We have seen the will of the majority ignored in wanton disregard for the spirit of democracy. We have seen expansion of government control over the care of our health and the advent of socialized medicine forced upon us.

We are watching a president inherit a recession then repeat the methods of Franklin Roosevelt who inherited a recession and turned it into a depression.

We have elected a president who has alienated our allies, Great Britain, Israel and Poland and chosen to appease our adversaries, Russia and Iran. We have chosen as our protector and Commander in Chief, a man who lays down our strongest arms in a vow not to employ our ultimate defense even in response to a nuclear attack.

We are led by a president and supported by an Attorney General who will not acknowledge the existence of Islamic terrorism, a president who appoints as a White House spokesperson a woman who names a genocidal dictator as one of the two philosophers she most admires, a president who nominates for a deputy position in the Office of Safe & Drug Free Schools, an activist for public school teaching of homosexual activity among young boys.

We have elected a president who travels abroad bowing and apologizing to nations for the role America has played in the world. We have entrusted our States now United to a man who promised  healing, but instead, waters the seeds of unrest, who upon seeing conflict between states, acts not to quell the dispute but to join in the fight.

To wish Obama to succeed is to wish for more of what we have seen thus far and more of what Obama still dreams, – visions of card check for unions, cap and trade for industry, reparations for minorities, single payer health care for us all and the dimming of our light that has shined so long and so bright proclaiming and defending freedom for all.

Bob B

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I urge you to question the observations in this post. Google is a great tool for the job and readily available to all. Here are some links where you may start, (listed in random order, of course).













There are many more, but these will get you started.