By the numbers, this is a garden variety recession – statistically, by the GDP numbers, it is ordinary. What is extraordinary, of course, are Wall Street’s self-inflicted wounds in credit. However, what is truly momentous is the [federal] government’s response – [there has been] nothing like it.
There have been 11 recessions/depression since 1929. On average, the sum of the fiscal and monetary response, as we index them, has been 2.9% of GDP. What is shaping up now is [a response of] 29% of GDP, 10 times the average response. This 29% response is three times the [federal government] response to the Great Depression for this current recession that is 1/15th the magnitude of the Great Depression. And they [the federal government politicians] may not be done yet [with their spending]. The sheer caprice and scale of government intervention must be frightening money under the bed.This level of deficit spending is indeed frightening. And all the more so because the real motivation for it in the minds of the ultra-liberal Democrat vanguard has little to do with fighting the recession. As Tim Reid wrote recently (link) in the Times U.K.:
What was most striking about the budget [spending level] - including that it will explode the federal deficit to $1.75 trillion this year, its highest since the Second World War - was that it was a ruthless declaration of how Mr Obama intends fundamentally to change the American social contract, from Right to Left. Its goal is not just to rescue the economy. It is to crush conservatism, end the age of anti-tax, anti-regulation policies that have been the guiding philosophies of US governance for a generation, and usher in a fresh “epoch”, as his aides call it, of New Deal-Great Society wealth redistribution and central intervention that were repudiated by Ronald Reagan 30 years ago.
John M Greco
