Monday, October 24, 2011

Double Dip This!

Good news continues to mount on the economy.  Third quarter profits were up 16% from last year’s third quarter numbers and the stock market is having its best run in God knows when.  Yep, things are really looking bleak these days, for the doomsayers, that is.  If Europe manages to avoid imploding, many analysts – the same ones mind you that warned us we were headed into a double-dip recession only six weeks ago – predict a far rosier prognosis for the economy in 2012.

Clearly the news points to the only conclusion possible.  That, despite all the nonsense coming out of the Right about how over-regulation and those terrible tax and spend policies are keeping corporate America from unleashing its full potential, the only remaining stumbling block to a full and robust recovery is that six-letter word that every first-year economics major has engrained into their cranium: DEMAND!

Profits are soaring; the market is climbing; investors know a phony issue when they see one.  Right now they’re buying and the reason they’re buying is because, despite persistently high unemployment numbers, the economy is actually much stronger than any one expected. 

What this reminds me of is that period during FDR’s second term when he bowed to Republican pressure and took his foot off the gas pedal, letting all the steam out of the recovery.  The result was that the economy slid backwards and unemployment, which had been steadily decreasing for four years, shot back up.

There is a time for easing off the accelerator and a time for flooring it.  History has proven conclusively that during tough economic times, the latter is clearly called for and justifiable.  With interest rates at historic lows, now is the perfect time for short-term stimulus spending to get people back to work.

When demand begins to go up, corporate America will begin to hire, not before.  The only thing cutting will bring about is a reduction in demand, which will cause an increase in unemployment, which, ironically, will increase the budget deficit.

When will these clowns ever learn?    

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