John Maynard Keynes believed that an economy could become a self-reinforcing economic depression because the general public saved too much money. He believed that the key to economic growth is not productivity, but rather spending. He did not believe that the price system is a reliable system of resource allocation. For example, he did not believe that the interest rate is a price that allocates investments and savings. He believed that it is possible that many people in the economy can save money by hoarding currency – not depositing it in a bank, where it is immediately lent. This, he said, undermined the interest rate’s role in equating savings and investments.  FULL ARTICLE

As the recession deepens, it will become apparent to all that the Fed has no will to fight inflation. Worse still, it will likely be seen that the U.S. Administration is diverting its vast resources away from restructuring and infrastructure spending towards the potentially inflationary, socialist-style prevention of restructuring through the subsidization of clinically dead companies, like the U.S. auto industry.  FULL ARTICLE

The recession, which has barely gotten underway, is going to hurt.  Period.

And, as Peter Schiff argues in the WSJ, there’s no free pass to get out of this one – “There’s No Pain-Free Cure for Recession” Continue reading →

The Fed, whose easy money policy created the housing bubble that has exploded in our faces, is back printing money and shoveling cash into the banks. And, though the Bush deficits are said to have been responsible for our troubles, a new Congress and president have advanced a deficits-be-damned, full-spending-ahead policy.  FULL ARTICLE

The “Big Three” represent all that is bad in American industry. They may be past the point where even radical surgery can help. However, like an organ donor, many of the resources now poorly utilized by these companies could offer tremendous value to more vibrant manufacturers. FULL ARTICLE

To fight the downturn that it can no longer deny, the government has budgeted some $3 trillion to spend the economy out of recession. However, there is increasing evidence that the recession is deepening, just as we have forecast over the past year or so. It is now rumored that a further $8 trillion (some $25,000 dollars for every American man, woman and child) is being considered. Many people are worried and are beginning to wonder where it will all end. FULL ARTICLE