Guest Post: Let's Have A Depression Now

Tyler Durden's picture

Originally posted at Monty Pelerin's World,

The United States is more than four years into its form of economic purgatory. The government pronounced the recession over in June of 2009. That announcement does not conform with reality or even subsequent government suspect data. Even the Administration-friendly New York Times knows better:

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent.

To believe the recession ended requires a bizarro interpretation of economics where bad is actually good and good is actually bad.

21st Century politics sees no need for truth. When government believes itself to be responsible for the economy and convinces the people of that, it has put itself into a box. In a world where government claims credit for good things, bad things ultimately become their responsibility as well. Recessions are bad things which government should not have allowed to happen or should fix quickly.

The reality is that government does not create wealth or economic abundance. (They can create poverty, however.) When recessions occur, they threaten the myth of all powerful government. The first reaction of government is to do something regardless of whether something makes sense or not. The second phase is to declare the problem solved (in this case, claim the recession ended).

This kind of politics is dangerous on two counts. First, government risks what little credibility it has left (which I might say is not necessarily a bad thing). Second, it causes government to pursue policies which reinforce its lies. It is these policies which created the current economic crisis in the first place.

The country’s economic problems began decades ago. In trying to cover them up with economic interventions (stimuli), government actions prevented the economy from correcting the imbalances that caused slow growth. From a political standpoint, economic policies encouraged institutions and people to use debt to live beyond their means. The massive debt buildup in both the economy and the government hid the underlying problems and allowed them to grow ever larger and more malignant out of sight.

After decades of such interventions, the economy no longer is able to function efficiently. In order to remedy the problems, massive liquidations of debt and misallocated assets are necessary. There is no other way to achieve an economic cleansing. It may be possible to continue this economic charade with additional interventions, but there is a limit to how far it can be continued. Japan has achieved zombie existence for over two decades by refusing to face up to the imbalances in their economy. Our government has chosen the same course of “extend and pretend.” There is no hope for a recovery until something like another Great Depression liquidates the built-up imbalances.

No politician wants to be in office when that event occurs. Thus, they make matters worse for the country by continuing to spend money we don’t have to prop up an economy that cannot and should not be saved. Their goal is not to repair the economy but to ensure the most favorable terms for their own re-election. As a result they continue to savage the future of the country in order to protect their own present.

People will eventually regain control of their government. They always do. Unfortunately the process of history is slow and sometimes ugly. Multiple generations around the world have never known freedom. China and the Soviet Union are two examples that are just now transitioning toward freedom. Are we to enter some institutional dark ages where our grandchildren and their grandchildren do not experience freedom? It is possible because all governments prefer more power for themselves and less liberty for their citizens.

The required change is so great as to be analogous to an addict trying to break his habit. Most addicts have to hit rock-bottom before reality intrudes. In the case of the US, we are going to hit rock-bottom when the economy collapses. That is likely to be within the next ten years and could be at the front end of that estimate. This world-changing event may (at least temporarily) drive a stake through the heart of big, oppressive welfare-state governments.

There is no guarantee that government will shrink when this happens. Civil unrest is a likely outcome. Statists may attempt to use the crisis to further expand government. Martial law and other restraints are likely. Hitler used a similar situation to rise to power. Parts of the Constitution were emasculated under New Deal policies that “had to be done” to pull us out of the Depression. Of course, we never got out of the Depression until after the end of WWII.

Economic pain and suffering will be great. Yet the economic calamity is unavoidable. It was pre-ordained by years of government interventions. Mathematical and economic laws will not be avoided. As stated by Ludwig von Mises:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

We are coming off the biggest boom in the history of the world. If Mises was correct, and I believe he was, then Keynes was wrong (and I believe he was). Thus far all the Keynesian dollars expended have had little effect other than to make this country poorer. We are set up to have a Depression greater than the one in the 1930s.

A Depression is not a good thing. Yet in this case, it may be the one event that can prevent a chapter in future history books entitled “The Demise of the Great American Empire.” Unless citizens and politicians return to their senses, we will be both impoverished and living under tyranny.

A reaction opposite that of the 1930s is a hopeful outcome. Despite the recent election, government is increasingly seen to be the problem. It is no longer viewed reliable, trustworthy or as a solution. Freedom is deeply ingrained in the American culture and most of us recognize how much we have already lost. The resurgence of books such as “The Road to Serfdom,” “Atlas Shrugged” and others similar indicate the public is interested. Historically low poll numbers for all politicians and the rise of the Tea Party movement are further indicators. The economic trauma may provide the catalyst to return to the founders’ concept of government.

Totalitarianism needs the military. More than any other segment of society, the military respects and supports the Constitution. If push comes to shove, they are likely to defend the Constitution rather than the government.

Government has reduced itself to little more than an insolvent zombie, staggering around awaiting the coup de grace that will end its misery. The coming economic collapse is that executioner. When collapse happens, efforts to increase government are will occur. They must be resisted strongly. The love of freedom and the experience with big government should overcome decades-long madness. No matter how things evolve, in the history books of the far future, there can be no better title to describe our current situation than “The Myth of Government.”

If we must have a Depression, let it begin today. It will be hard and dangerous, but it may be the last chance to get our country back. When it happens, we must all think and behave like Founding Fathers. To paraphrase Rahm Emanuel, this crisis will be too important to waste.

The “greatest generation” handed us a gift and we fumbled it away by allowing government to run wild. We cannot turn this mess over to future generations. We must take our country back and remedy the problems.

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PGR88's picture

The military is only relevant outside the USA

Within the USA, we now have so many para-military police, the military won't need to lift a finger.  Even the EPA has its own police-force now.  Our little town just bought (or was given) a massive tank-like armored car, courtesy of a "grant" from the Dept. of Homeland Security.  All I could think is "WHY?"

Urban Redneck's picture

Cutting consumption in half has already been taken care of-

Compliance with the forthcoming Obamacare regulations on private businesses in the US will lead to a massive reduction in energy consumption, and hence real GDP, in the next 24 months.

The impotent can diddle with tax rates all they like, but the ratio of government spending to tax receipts will EXPLODE, regardless of the FED's efforts to inflate away the State's debt problems.

Tinkering with statistics and money supply can only obfuscate so much reality, stupidity and failed education education system can only forestall the recognition of reality so long, then there is DEPRESSION.

CH1's picture

Agreed, but I don't want to "take back government."

Government is organized force, devoted to perpetual robbery. It is immoral in its essence.

NotApplicable's picture

"People will eventually regain control of their government. They always do."

Yet another fuckin' stupid-ass Hopium junkie. Dangerously stupid.

Umh's picture

He didn't say in which century; he just said eventually.

Incubus's picture

they never do;


the average dog thinks he owns his yard, too.

theprofromdover's picture

they can't do nothing if they dont have your tax dollars.

Zap Powerz's picture

I dont want to take back anything that wasnt mine to begin with.

NoDebt's picture

Say, that just gave me a thought....

Did you notice the old-timey propoganda graphic used with this story?  American rolling up his sleeves and getting to work on some monumental task for the good of the country.

What would today's propoganda graphic look like?  Morbidly obese guy laying on the couch drinking beer and chugging Cheetos with a remote in one hand and his EBT card in the other, bong on the floor next to his couch.

Oh, that's just wrong.  I really went too far this time.  I pre-apologize.  Don't know how my mouse ever made it to the "save" button to actually put that comment up.  Yet somehow it did. 

mofreedom's picture

Hey, me just gettin my suave Irish inspired korean face out of bed each day is good for America.  Vote sucession while you still can. Gov of one plus family and friends.

TWSceptic's picture

So anarchy is the solution then? What happens if someone disagrees with the anarchy and starts a government that gains power? Stop them with force? You couldn't because that would be against your own principles.

CH1's picture

What happens if someone disagrees with the anarchy and starts a government that gains power? Stop them with force?

Nope, they can do whatever the hell they want - smart or stupid. They just can't force us to live their way.

Dr. Sandi's picture

Anarchy doesn't have the kind of rules described here.

New England Patriot's picture

CH1, I disagree.


If a government can be restrained to simply enforce justice between individuals in society, and in turn protect that society from outside aggression, then government will have fulfilled its noble purposes.


Those purposes do exist, and have demand. 

CH1's picture

Hi NE Pat, a few comments:


1. Guv can never really be retstrained. It's a monopoly on force, and Acton was correct that power corrupts. In the end, we always end up with corrupt force. And, as I said above, the operation is immoral by nature. Evil seeds bear evil fruit.

2. Outside agression is pretty much the same as inside agression. Boss A versus Boss B. Government is geo-stationary conquest. The changeovers can be horrid, but that's also a function of governement: People may fight from time to time, but states fight non-stop. Of 200 states, 20-30 are always actively fighting. Compare that to your neighbors.

3. I agree that being safe from agression is a good purpose, but hiring an agressor to prevent agression is not, IMO, a good strategy.


New England Patriot's picture



Good thoughts, but a few counter points.


The use of force is sometimes moral. Government that properly understands where and when force is moral can be a successful agent of the natural law. I am in favor of this. There is such a thing as good government. The problem is that human beings are inevitably fallible, and will tend to seek power for themselves in the form of corruption. 


A good government needs to be restrained by a constitution of some kind, with clearly enumerated powers. Our Constitution here in the United States is a good example of that. Once again, the problem is when the government "jumps the shark" and seeks to expand its powers outside the boundaries of its lawful mandate.


I don't want to come across here as saying that we're in danger of getting government right here on Earth any time in the near term. Really, our best bet is to deny government as much power as we can, while still enabling it to perform the moral act of protecting the truly oppressed through the use of force. 


And remember, aggression against an aggressor is not immoral in the least.


Until Christ returns, I don't hold out much hope for government. Periodically, we will need to revolutionize governments when they get too far out of balance with real justice.

NotApplicable's picture

"We" have little say in the matter. To believe so, is to empower the criminals bent on destruction.

HelluvaEngineer's picture

The sooner we do this, the smaller my liver will be.

e-recep's picture

it would be the easy way out. naah, it wont happen, rome didnt fall in one day. it will be the hard way, the middle class will rot to the core for many years to come.

prains's picture

The “greatest generation” handed us a gift and we fumbled it away by allowing government to run wild.


but you make the mistake that the govt is controlled by politicians and not the 0.1% which CALL ALL THE SHOTS, you need to go one floor higher in your search for BLAME>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>FORWARD, next floor please.......ding

Dr. Sandi's picture

Then look for the door with no sign on it.

Peter Pan's picture

We should have had a depression four years ago when people were not as angry, worn down, depressed and penniless as they are today. A depression is now out of the question. Chaos is unfortunately a more likely outcome and will manifest tself with riots, wars, intrusive government and more circuses than ever.

Umh's picture

They were to busy not wasting a crisis.

Nadaclue's picture

Well sir, one having seen the destiny that confronts, one should make provisions to minimize the dangers perceived, real or imagined, by acting accordingly to minimize such dangers to oneself and family.

I send blessings to those that do so. The rest of the herd, deserves what they get as Darwin always wins.


Dr. Sandi's picture


We should have had a depression four years ago when people were not as angry, worn down, depressed and penniless as they are today. A depression is now out of the question.

Are you saying we're too depressed to have a depression? Then I say, hand out Prozac all around and lets get the party started.

TBT or not TBT's picture

Yay circuses!    These are the times that entertain men's souls.

Daily Bail's picture

Keynesian thought leaders Krugman and Delong won't allow a Depression.  They would rather we spend money until everywhere looks like Detroit.

This is worth the click.  It's not about golf.

Pulitzer Prize Winning Reporter Golfs The Dying Streets Of Detroit

Kreditanstalt's picture

Amusing & good look at the city but kind of a thinly-disguised ad for higher taxes for more public employees...

whoopsing's picture

Off-topic, big gold heist in Curacao

JLee2027's picture

Shipping 11 million worth of Gold by fishing boat? I don't think so.

JLee2027's picture

Insurance scam? Hiding assets from the ex in a divorce? I don't know. But if I had 11 million in Gold, I sure as heck wouldn't put it on a small 50 year old vessel in poor condition and then tell the enough people what was on board so I would be robbed by a specially-dressed-for-the-occassion and prepared Gang. Inside scam of some kind.

Esso's picture

Gold lost in a boating misadventure? I wonder which ZH poster it was.

blunderdog's picture

Is that where they make that blue triple-sec stuff?

Itch's picture

Sell your soul for a sausage roll.

kengland's picture

So long as that ends the central banking concept. My fear would be CB's would survive a dep

buzzsaw99's picture

Narrow in scope, disjointed, and pointless.

Go Tribe's picture

"The “greatest generation” handed us a gift and we fumbled it away by allowing government to run wild."


BULL-FUCKING-SHIT! The "greatest" generation laid the groundwork for this mess. Big government, nanny state, Great Society, Squids, affirmative action, medicare, social security.  The greatest generation? WTFUUUCK?

Yen Cross's picture

We have been in a depression since 2008. Look at bond prices, and interest rates. A ZIRP economy, with endless $ printing is like Hugo Chavez saying he is cancer free!

Oquities's picture

contained depression (due to social spending), corralled deflation (in real estate and interest rates exclusively so far), and inflationary monetarism (soon to explode).

kaiserhoff's picture

Well said.  Our tyrant leaders don't understand that their financial perversions are cumulative.  The longer this lasts, the greater the dislocations when things snap back to reality.

algol_dog's picture

The “greatest generation” handed us a gift and we fumbled it away by allowing government to run wild.

Never truer words written ...

HelluvaEngineer's picture

Yeah - by killing all those fucking Germans!

knukles's picture

I've never had an asian girl....
Is it true their snortches go sideways?

prains's picture

you need to aim higher

NotApplicable's picture

Government ALWAYS runs wild. Take a look back at any time period, and you will see how it has always functioned as a predator.

The only difference about "this time," is your front-row seat.

Lincoln DESTROYED the voluntary union.

Wilson DESTROYED the peaceful republic.

FDR... well, what didn't he destroy?

It's all about incrementalism. You're born into one environment that ALWAYS decays before disappearing before your eyes (if one bothers to look).

Please stop drinking the Kool-Aid. Our lives are at stake here.

Wakanda's picture

"The “greatest generation” handed us a gift" is another propaganda lie.

We were handed a polluted world run by a few psychopathic banking families.  The "greatest generation" did not have the nuts to call the banksters out and end the charade. They are sheeples, cowards and cover their asses with all manners of lies.

I will not pass the world on to my kid(s) in the current state of confusion and despair.  I am busy cleaning up the "greatest generations" messes.

SpykerSpeed's picture

THANK YOU.  Great reply.