Recession or Depression: Two Analogies.

Part One: Economic Whirlpool Caused by the Political Cesspool!

Every day the news about the economy is shocking for one reason or another. It is enough to make one’s head spin.

Combined with the mixed signals of the data reported by the empiricists are the explanations of the spokespersons of economic statistics. Their interpretations are mostly sterile, functioning much like propaganda most of the time. Anyone who thinks that this information/misinformation will be useful in decision-making is either pretty naive or is part of the scheme of the political class which is trying to enrich itself at the expense of the rest of us. Regardless, the point is, the empirical data and the statistics and the analysis are all erroneous.

When does a recession become a depression? I will explain that in this article.

At some point the practice of pumping money into the credit system and the banking system causes a fracturing of the capital structure. All the malinvestment caused by the distortion of the interest rate begins to become evident as the scrambling for resources exceeds what was thought to be available. This is a significant part of the beginning of the recession. Also the over-consumption stimulated by the artificially low interest rates hits consumers in the face as an overburdening debt. Consequently, restrained consumer spending and business streamlining causes unemployment.

Monetary policy by the politicians (and their minions) leads to inflationary policies in an attempt to stimulate the economy, but what results is stagflation - high unemployment and high rates of inflation. This is the worst case scenario for what can be described as a recession. But it is not the end of the line!

The ‘perfect storm’ scenario is called a depression. In short a depression is when there are all of these same extreme recession conditions combined with a deflationary spiral. Money, despite massive pumping into the system, disappears!

I describe the depression as a whirlpool where the currents created by the interventionists become so powerful and misaligned that they generate a whirlpool where everything is sucked into the depression. Any actions taken by the interventionists simply add to the currents and intensify the whirlpool. The debasement of the currency manifests itself as hyperinflation and yet there is no credit available since there is no real savings. Recovery is nil or strongly suppressed because alert entrepreneurship cannot decipher the mixed up signals. The depression will persist as long as the interventionists continue to feed the spiraling whirlpool with fallacious economic policies.

Are we currently in a depression or are we about to enter a depression? The forces unleashed by the interventionists are very erratic. It could be that one of the next actions taken by the interventionists will trigger the depression whirlpool. Who knows?

What we do know is that a depression is an exponential recession that cannot be stopped if what causes the currents is continually fed by the interventionists. Imagine the unstoppable pull of a whirlpool. What we do know is that the cesspool of interventionists (composed of politicians and their bootlicking economic advisers) are responsible for all economic disruptions, whether the disruption is minor or whether it is a major catastrophe like a depression.

What is the solution? The correct policy is non-intervention which is like getting oneself out of the water before the currents build so much momentum. Then the equilibrium forces that allow resources to become freed up will disrupt the vortex throughout its structure, dissipating the energy, lessening the swirl velocity, causing it to break into smaller eddies, and making the economy safe for entrepreneurs to re-enter, to diagnose, and to set their sails and forge a new direction.

That new direction that is necessary for prosperity and liberty is non-interventionism! In America a restored Constitutional Republic is what can prevent the economic destruction that is brought about by the ego-driven interventionists (who happen to be the major active component of the political cesspool).


Part Two: Is Examination of ‘Economic Depression’ Fruitful

I recently wrote the above piece that described an economic depression as something similar to a whirlpool. After I finished the article I realized that I could apply a similar analogy to an economic recession. In contrast to a whirlpool, the economy during a recession could be seen as a ship experiencing rough seas. If the economy reaches the climax of a recession, known as stagflation, then the seas are very rough and the ship (the economy) is in danger of capsizing.

Here is what is significant about these analogies: If the economy does not capsize during the recession there is hope that eventually the rough sea will subside. But if intervention continues it will cause another storm to form on the horizon. However if the economy is on the verge of a depression one false move will generate the whirlpool which will sink the economy into unknown depths with very little hope to resist.

If intervention continues once the whirlpool is activated the currents will just intensify. The only hope is for the intervention to stop.

What is the solution? The correct policy is non-intervention. Then the equilibrium forces that allow resources to become freed up will disrupt the vortex throughout its structure, dissipating the energy, lessening the swirl velocity, causing it to break into smaller eddies, and making the economy safe for entrepreneurs to re-enter, to diagnose, and to set their sails and forge a new direction.

What bit of economic wisdom have we gleaned?

A). Intervention causes the economic storms and it can also create a pernicious whirlpool. To avoid economic storms intervention should stop.
B). With regards an economic depression, the only way to stop its destructive forces is to stop intervention.
C). The political cesspool (politicians and their bootlicking economic advisors) has to be drained and rid of its stagnant and disease-infested economic fallacies.
By Bruce Koerber
Author of MORE THAN LAISSEZ-FAIRE (2008)

For more information go to http://www.divineeconomyconsulting.com/ .