Is the US Economy Close to Hitting Bottom? – Frank Shostak – Mises Institute: “Most experts and commentators are of the view that the worst of the US recession may be over by year’s end. My own prediction is for an illusory recovery of government-constructed economic indicators, but nothing more than that.
Most experts are of the view that the worst of the US recession may be over by year’s end. Common opinion holds that the key reason for the expected turnaround is the positive effect that the policies of the government and Fed have on various economic indicators. The pace of monetary pumping by the US central bank jumped from 4% in September 2007 to 152% by December 2008. With respect to fiscal stimulus, aggressive government spending has resulted in a record deficit of over one trillion dollars in the first nine months of fiscal year 2009. Careful examination shows that, rather than protecting the economy, it is loose monetary policies that are the key source of boom-bust economic cycles. Loose Fed and government fiscal policies have only weakened the wealth generators’ ability to grow the economy. Aggressive policies have inflicted severe damage to the sources of funding that support real economic growth. Hence, we are doubtful that the US economy is on the verge of a solid economic recovery. On account of massive monetary pumping, the growth in momentum of various key economic data is likely to strengthen in the months ahead. We maintain this may prompt Fed policy makers to consider curtailing the pace of monetary pumping, and we suggest that this will set in motion a new economic bust.”