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Pundits who characterize the worsening downturn as a "Double-Dip" recession do not understand the economy and are undeserving of credibility.

The term "Double-Dip" has joined "Perfect Storm" and "Keynesian Stimulus" as monikers which misrepresent reality and demonstrate an unenlightened grasp of economic events past and present. 

"Perfect Revisionism"

It must be comforting for some to ignore collective culpability for the financial crisis and instead blame the malaise on a confluence of unavoidable events.  Thus the "Perfect Storm" analogy.

A storm is an act of nature.  The weather may not be constructed unintentionally or by design.  It is not predictable. 

There is nothing about our present economic calamity which resembles a storm. 

The housing and credit bubbles were methodically manufactured.  For years politicians, policy makers, bankers, mortgage brokers, home builders, speculators, consumers, fraudsters, investment bankers, real estate brokers, rating agencies, institutional investors and the media worked in concert to heap ever greater amounts of debt on increasingly overvalued houses.  The savings rate plunged, consumption soared and all basked in the glory of an unsustainable economic distortion.

There was nothing natural about the Housing Bubble.  Homeownership was consciously created.  Profiteers identified the phenomenon and actively sought to monetize its momentum.  Giving the uncreditworthy highly-leveraged mortgages to buy overvalued houses resulted in a predictable outcome.  The storm analogy is grossly misrepresentative.   

Blame it on Maynard

I wonder what percentage of politicians could accurately describe the economic theories of John Maynard Keynes?  His name has been invoked to justify deficit-financed spending, yet nothing about current stimulus remotely resembles Keynesian Economics.

Keynes would never have advocated:

• Government involvement in creating homeownership
• Regulatory, legislative or executive initiatives designed to distort lending standards and activity
• Federal policies which contributed incrementally to economic activity during a period of robust growth
• Stimulus spending as the response to a deflating credit bubble
• Deficit spending that is anything other than temporary
• The accumulation of debt that is not going to be repaid immediately upon recovery
• Any Government policy designed to prop up asset prices or economic activity at unsustainable levels

Keynes would:

• Aggressively cut taxes
• Remove impediments to the markets clearing such as foreclosure moratoriums and federal mitigation efforts

Keynesian economics has been inaccurately cited to justify wasteful and ineffective deficit spending.  So-called "Keynesian Stimulus" bears no resemblance to Maynard's directives.

For a more detailed analysis of Keynesian economics: "Why Keynes is Irrelevant"

The Economic Distortion has also Mutilated the English Language

The above terms are no more appropriate than using the word "luxury", debased and mutilated by a generation of real estate marketers, to describe poorly constructed, converted and unwanted condos for-sale nationwide.

The Single-Dip Recession

A "Double-Dip" Recession requires an initial recovery.

For 18 months the Government has distorted economic data with deficit-financed spending, consumer subsidies, loose credit, expansive monetary policy and the lowest interest rates on record. 

Properly accounted for, there has been no recovery.  If McDonald's borrowed a billion dollars and used it to purchase Big Macs no accountant would credit the firm with revenue or profits resulting from the "stimulus spending".  But when the Federal Government performs an equivalent action GDP is growing rapidly and the recession has ended.  One cannot properly evaluate a recovery without examining undistorted economic trends and accounting for the burden of accumulated debt.

The Government paid people to buy cars and generated a momentary surge in car sales.  The Government paid people to buy homes and manufactured two spikes in purchasing activity by shuffling the expiration date (a housing "Triple-Dip"???).   Positive GDP resulted from the accumulation of debt.

The undistorted private sector is not growing or hiring.  There has been no sustainable turnaround.  Economic fundamentals which are driving the Depression have not improved.  In many respects our economic situation has worsened. 

Fading economic distortions, which were concocted using unsustainable, deficit-financed spending, bear no resemblance to a double-dip recession.

This forum has argued for 18 months, based on a fluent understanding of the economy's challenges, that no amount of stimulus would resolve the structural impediments to a recovery.  The logic underlying the Stimulus Bill and the purported benefits of its wasteful spending were a fraud. 


Excerpt from "The Stimulus Bill, Like All Government Interference To Date, Will Fail" - 2/10/09

"The Stimulus Bill will not work because it cannot work.  Anyone who truly understands what is transpiring in the economy will recognize that this is the largest, single instance of waste in the history of the World."

"Spending huge sums of money that we don’t have, burdening our economy with the liability of having to service and repay another trillion dollars of debt, all to create a few government dependent jobs which produce no real economic value will do nothing to alleviate any of the economy’s problems.  What it will do is distort the economy further, obscure what is really transpiring, slow down the economy’s inevitable reset, deepen the economic crisis and threaten the US Government’s solvency and credit rating."