A dunce caused the recession, but a “genius” cannot manage a recovery…?

OK. So America once had a prez that spewed malapropisms & mangled grammar. Worse, he made some disastrous foreign policy & a serious recession took shape on his watch.

But that was yesterday and George Bush is enjoying a solitary retreat on his ranch.

Now the US economy is being overseen by a man that some consider to be a genius, if not a messiah.

With the end of the recession declared, President Obama owns the recovery.

In the past, recoveries for the US economy were a slam dunk. Just sit back while the private sector shook off excess capacity & dumped over-priced assets.

Not this time! High ratios of public-sector debt relative to GDP, increased regulatory burdens & threat of higher tax rates are choking off attempts at economic recovery.

You hated the recession? Well, there ain’t much to like about the recovery

The National Bureau of Economic Research (NBER) has declared the “Great Recession” to be a matter of history.

“The Recession is dead, long live the Recovery!”

Ooops, not so fast. This recovery is not your father’s recovery as it is more like a dead-cat bounce.

With housing starts lagging & unemployment rates remaining high, there is little to really cheer about. And much of the good news looks less cheery.

For example, the Obama administration trumpets rising US exports. But these came on the back of the steady erosion of the international value of the dollar over the past 2 years.

Since this implies a weak-dollar policy, the US is open to accusations of being a “currency manipulator” on par with China.

In fact, this is more evidence of incoherent analysis & policy prescriptions from the White House economic advisers.

In trumpeting the presumed dangers of deflation, they provided an excuse to expand expand government spending, every politicians dream.

This is odd since consumers are helped, not harmed by lower prices of commodities.

And concern about declines in some asset prices is overblown since this is a natural, inevitable & beneficial outcome of the bursting of “bubbles”.

Removing the impression that deflation is the biggest problem removes the primary excuse for pointless, nay, counter-productive “stimulus” spending.

Now, back to the sluggish recovery. Many observers gave reassuring arguments about the resilience of the US economy. Indeed, this was true as long as the market & the private sector of the US economy had enough breathing room.

This time the needed oxygen has been sucked out of the system with debilitating regulation & excessive public-sector borrowing.

While much of the deficit spending supported public-sector pensions & sustained jobs for bureaucrats, private-sector workers lost jobs & pensions.

Talk about unfair! The problem with the economy is not large bonuses to executives or an unregulated financial sector. The biggest problem is spending commitments that benefits public-sector employees at the expense of taxpayers.

Consensus in science implies ideology rather than honest inquiry

“Any system which judges men by the completeness of their conformity to a fixed set of opinions, by their “soundness” or the extent to which they can be relied upon to hold approved views on all points, deprives itself of a support without which no set of ideas can maintain its influence in modern society.”

“It is perhaps the most characteristic feature of the intellectual that he judges new ideas not by their specific merits but by the readiness with which they fit into his general conceptions, into the picture of the world which he regards as modern or advanced.”

~Friedrich A. Hayek~

Congratulations, Kumar!

One observation about the Austrian School of Economics is that there are not many practitioners that offer investment advice.

One outstanding adherent of the Austrian School is Dr. Jim Walker of Asianomics. While he was chief economist for Asia for Credit Lyonnais, he was often cited as the best analyst for the region.

Now he operates an independent consultancy that provides a wide range of services to subscribers.

He recently hired Kumar Anand, a colleague from the Centre for Civil Society in Delhi, to provide on-the-spot analysis from India. Kumar’s first essay evaluates the monetary policy stance of India’s central bank, the Reserve Bank of India (ExposAsia (No 24/2010, “India’s Bank To Bank On”).