The Zombie Economy Is Dying

Monty Pelerin / EconomicNoise.com

It is easy to rant about the economic condition of this country and the world. It is, quite simply, horrible and terminal. The US economy, like a zombie, staggers around half alive and half dead in its own special purgatory. The other developed social welfare states of the world are in similar condition.

This blog frequently discusses why there can be no recovery until a death and rebirth occur. For most, the logic and theory behind such a position can never be definitive. Too many are capable of learning only via experience. Until something happens, they assume that it cannot.

Rather than attempt to provide another deductive chain of reasoning as to why another Great Depression is unavoidable (and necessary), it may be more useful to counter the notion that the economy is in recovery and we are returning to normal (whatever that means). I doubt that many past the age of fifty will ever see what they considered to be normal (something akin to the 1980s or early 1990s).

There is nothing that government can do to change this scenario. Indeed, continuing to try will only make matters worse. Our zombie economy must die before it can be resurrected. Despite all the political propaganda to the contrary, that is exactly what is occurring. For the sake of the nation, it would be better if this death came sooner rather than later. Politicians, however, intend to keep the charade going for as long as they can. Their actions will work to their own advantage, but will ultimately make the recovery more painful and difficult.

Their favorite (only?) tool is Keynesian economics. It is like bloodletting. An observer can see that something is being done and admire the concern and technique of the physician. In small doses it is harmless (but not beneficial). In larger doses Keynesian economics becomes dangerous. When continued for long periods it eventually kills the patient. That is an analogy appropriate for the economy of the last several decades. The doctors know no other methods so continue to up the amount of bloodletting.