Despite the chorus of praise, the TARP bailout was a terrible idea that will cost taxpayers both directly and indirectly through its perverse incentives. Only the Austrians consistently opposed the Republican and Democrat bailout schemes.
Blinder is arguing that of course the Obama stimulus worked, because spending money creates jobs, period. To see just how naive this view is, consider that there is nothing in Blinder's argument restricting it to cases of severe recession.
If mainstream analysts continue to disregard the role of regime uncertainty in the major depressions of the modern era, especially in accounting for their extraordinary duration, then they will only demonstrate the poverty of their own mode of analysis.
It is not the system of private enterprise and free markets that is responsible. It is the suspension of that system. It is not capitalism but interventionism and monetary uncertainty that are responsible for the persistence of the slump.
In the last week there have been many interesting developments involving gold. The price of the yellow metal set a new record, breaking through the $1,300 barrier. A German firm is preparing to install gold-vending machines in the United States. There's more.
Some people are saying that all we need is optimism, as if our attitudes alone cause and fix the business cycle, and as if the real world doesn't matter at all. Actually, the "bad attitudes" of consumers and producers are the real fix: they lead to deleveraging and saving.
Shostak suggests that the NBER's definition does not provide an explanation of what a recession is all about. Instead it describes the various manifestations of a recession. And this is precisely what is wrong with it.
Just as more and more analysts are worried about the economy imploding again, the NBER announces that the recession ended back in June 2009. The whole episode underscores the crudity of mainstream economics.
Because they are based upon a falsehood, Keynesian policies fail empirically, quite obviously to anyone with an open mind.
Our analysis indicates that not only can fiscal stimulus not revive the economy but, on the contrary, it can also make things much worse.
