Comment by ibsulon
16 years ago
However, the government is functioning like a corporation currently with its spending.
(And I'm not convinced banks are finished increasing their reserves. Wells Fargo is still in the danger zone after acquiring Wachovia, as one example.)
In a way, but it's doing so more like a drunken sailor than with any rationality.
The Austrian school says that recessions occur when the economy gets over-invested in some area. The recession occurs as we recognize that what we've invested in is not worth as much as we thought ("hey, these are just regular crackers!"). Then the values roll back as we get out of that dead-end while moving our investments into better values.
To the extent that this is true, our government is not helping. They're spending with abandon, but direction of the spending is either wildly shotgunned, or politically correct. With the decisions in the hands of the people and corporations making up the market (I think I can see you cringing as I say that), the processing of transitioning will in all likelihood be faster and much more efficient.