-Caveat Lector-
Return to The New Australian
Bush did not accelerate recession
by Gerard Jackson
TNA News with Commentary
Thursday 25 January 2001
"New presidents almost always want to take over in recession and
leave in a boom, so they almost always bad-mouth the economy when
they come in. Maybe Bush has gone a little bit farther in wishing
for a recession than others have." So said Barry P. Bosworth, a
senior fellow at the Brookings Institution, a Keynesian think
tank.
There is probably a certain truth in what Bosworth said but to
suggest that Bush's public utterances on the economy may have
contributed to recession is just Democratic hogwash. The
recession was clearly underway before the election and that means
it started under the Clinton Administration. That President Bush
should endeavour to remind the public of that fact is not only to
be expected it also makes good political and economic sense. If
the Democrats could pin the recession on him they would paralyse
his economic policies. But I suspect that that wouldn't cause Mr
Bosworth too much concern. Democrats can be amazingly blasé about
the American economy when it serves their electoral interests.
As I have pointed out a number of times, the true nature of
recessions always confounds the prevailing economic orthodoxy.
Highly paid economists are sitting in their Wall Street offices
trying to figure out what's up. It's almost an Alice-Wonderland
situation where nothing is what it seems. Steve Slifer, chief
economist at Lehman Brothers called the slide in economic
activity "an odd-looking slowdown".
Of course it's odd if your thinking has been muddied by the
Keynesian approach. In its January outlook for regional
manufacturing, the Philadelphia Fed, posted the second severest
month-to-month fall since the survey began in 1968. What make
this odd to the likes of Slifer is that employment is still at 4
per cent while the service sectors and housing are still holding
up even though car manufacturing is obviously in trouble. It's
this situation that causes them to claim that overall economy is
not in recession but manufacturing is. If a ship was slowly
taking on water no one would claim it was basically OK because
only the engine room and the bulkheads had been flooded so far.
There is a lesson here from the Great Depression if only some of
these analysts were prepared to look, learn and think. It was
certainly observed at the time that the retail trade, the final
stage of the production structure, was the least affected by the
depression where as the manufacturing stages suffered greatly,
with the financial pain increasing as the distance from the point
of consumption increased.
The process, to a much lesser degree, fortunately, is occurring
now. This is why the 4 per cent unemployment figure is deceptive.
It's because demand in those areas closest to consumption is
holding up that the unemployment rate hasn't risen. A closer look
at the figures shows that unemployment in manufacturing has been
rising. How else could it be when manufacturing output has been
falling?
Returning to events that took place just before the Great
Depression we find that December 1928 is a key month. It was then
that the Fed slammed on the monetary breaks and froze the money
supply. Six months later manufacturing output began to slide,
which is what one would expect. The stock market felt the blow
some three months later and shortly afterwards America was in
depression. The sequence of events is clear and beyond dispute.
But only the Austrians have accounted for them - and certainly
not the Keynesians.
What is now accelerating under the Bush administration and was
well established under Clinton is nothing new, odd or
inexplicable.
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Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT
FROM THE DESK OF:
*Michael Spitzer* <[EMAIL PROTECTED]>
~~~~~~~~~~~~~~~
The Best Way To Destroy Enemies Is To Change Them To Friends
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