When reading Wall Street Journal stories such as CBO:
Unemployment Extension Would Add 300,000 Jobs, it’s easy to come
away with the impression that the economic world we live in is radically
different than it was just a few years ago. And, now almost three-and-a-half
years after the Great Recession officially ended in 2009, when perusing Wall
Street Journal reports such as Fed
Stimulus Likely in 2013, it’s not hard to conclude that we are
living in a modern day depression.
The times are surely different than 80 years ago,
one of the biggest differences being how the federal government has responded
to this economic crisis, and therein lies a frightening possibility for our
collective future for anyone who thinks the malinvestment
that developed during another historic asset bubble must be purged before
sound economic growth can continue – if the Great Depression lasted a
decade with far less government support, how long might the current slowdown
persist, given that large swaths of the economy are being propped up by
massive deficit spending and money printing in Washington?
Perhaps more importantly, have the borrowing and
spending efforts by elected officials and the money printing actions of
central bankers in recent years set us on a cataclysmic course, one that
wasn’t even possible 80 years ago?
Without reading the first sentence in the first
story noted above about extending unemployment benefits, you get the clear
impression that the financial media and policymakers may have reached a new
level of desperation in their quest for more jobs and stronger economic
To be sure, it is the job of the CBO (Congressional
Budget Office) to do all sorts of calculations to help policymakers make
decisions, but when borrowing another $30 billion to continue extended
jobless benefits directly translates into “adding” 300,000 jobs
to the U.S. economy (and boosting growth to boot), something is seriously
wrong with what the CBO is being asked to do these days.
If the U.S. government was
sitting on piles and piles of money, one might argue that they should just
write checks to all U.S. citizens – not just the unemployed – and
this would give the economy a real boost, but nearly half of what the
government spends is borrowed money, though this seems to bother fewer and
fewer people with each passing day, particularly since the election earlier
Some 15 million families (or almost 50 million
Americans) now rely on food stamps that account for a whopping 80 percent of
the $1 trillion “Farm Bill” passed by the Senate last summer.
While no one likes to see people go hungry, it’s worth pondering the
long-term impact of making food stamps as easy to use as swiping a credit
card, that is, rather than the stigma and inconvenience associated with
Depression era breadlines.
The fact that the nation has a major obesity problem
and that consumers still find a way to fund holiday purchases during the
madness otherwise known as “Black Friday” make this an even more
intriguing comparison to the 1930s, one that historians will no doubt delight
in analyzing many years from now.
But, probably the most disturbing comparison between
the 1930s and today is the lengths to which the Federal Reserve has gone to
aid the ailing economy, already printing about $2 trillion in new money to
buy housing and government debt and, as detailed in the second Wall Street
Journal story above, now likely to up their money printing efforts to about a trillion dollars a year,
until such time that the economy improves.
Never before has the central bank printed so much
money with so little impact and this is another important distinction between
80 years ago and today – nobody knows where the Fed’s past and
future actions will lead.
Most historians credit the onset of World War II and
the resulting surge in U.S. war-related exports to Europe for pulling the
economy out of its decade-long funk, however, there
is nothing of that scale on the horizon to turn things around during our
modern day depression.