Friday, July 10, 2009

Is The Recession Improving?

In the past 24 hours you will find a lot of news about the IMF (International Monetary Fund) calling and end to the recession. "World Recession Easing" and "World Starting to Pull Out of Deep Recession" says the IMF, reports Reuters, AP via Yahoo News, Fox News and many others. The only part I find to be anything but fiction is the "Deep Recession" part. However, I would content that, if there was more factual reporting, the 'R" word would have to be replaced with the big "D". We more likely than not are already be in another Great Depression if the statisticians were to use more accurate numbers.
For example, just two benchmarks used for judging the health of the economy, jobs and bank closings, are not as accurate as most would be lead to believe. The unemployment rate is determined by counting only those people who are currently collecting unemployment benefits. And as for back closures, during the depression each bank was just that, one bank. Now when a bank goes under, it takes with it multiple other "banks" in the form of branches and atm machines.

Not to be to harsh, the IMF needs to get credit for calling this the worst recession since World War II and for saying that recovery will be sluggish. That may be an understatement but then they go on to say that 2010 will be a stronger recovery. I and many others who have no axe to grind are not so optimistic and for good reason. Some are starting to question the old "buy and hold" strategies for basing their futures upon. They are no longer under the impression that, whatever we get into, the Fed and our government will be able to somehow juggle things around to get us out of it, and rightly so.

History is said to be our best teacher. And wherever copious amounts of fiat currency (unbacked by anything of real value) or, in other words, as in our current monetary system, has been printed up, there has been trouble. In Germany's Weimar Republic, the value of their money dropped so much that it was said a person needed a wheelbarrow full of it to get a loaf of bread. Similarly in Zimbabwe they just kept making new money with more and more zeros on it. What started in 1980 to be worth $1.47, the Zimbabwean dollar in 2006 was only worth one millionth of a British Pound. A new laptop computer was recently advertised for 1.2 quadrillion Zimbabwe dollars. That's hyperinflation and it is the result of printing more and more money like is currently being done. These developments do not reverse themselves with any amount of help in a couple of years.

So, the next time someone tries to convince you that everything can be "fixed" by some new type of policies, let history guide your thinking, not emotions.

No comments:

Post a Comment