Is the Recession Over?

While Bernanke might want the recession to be over more than just about anyone else, it's only by the government's skewed methods of measuring such things that the economy appears to be getting better. In reality, we are still very deep in recession, and are very likely to stay here for quite a while because of the government’s attempts to create an artificial recovery through interventionist, Keynesian methods which involve government stimulus plans, government spending, and government restrictions on the market.

The first thing wrong with their determination of whether the economy is in a recession or experiencing economic growth is that they only look at whether or not economic growth is positive or negative. Had the economy not gone into recession, economic growth would be much higher than just the fraction of a percent that is expected in the near future. But the government, through the NBER, will claim that the recession is over the moment that GDP starts to increase by any amount. Whatever this small percentage gain will be, it won’t be anything like pre-recessionary levels, and it only makes sense if we consider a recession over once its effects are gone, which should mean a return to full productivity.

The second thing wrong with this determination is GDP itself. Gross domestic product is a very poor measure of economic welfare, particularly because it includes government spending. So naturally, if the government simply passes a large "stimulus bill," then GDP will increase, all other things equal. However, this spending doesn't actually increase economic output or improve the economy, and therefore does nothing to help the economy recover from a recession. In fact, it accomplishes the opposite. By spending money for the purpose of spending money, valuable resources in the economy are wasted and the structure of the market is prevented from changing to fit consumer demand, making certain aspects of the recession illiquid and thus prolonging the economic pain. And of course, any money the government spends is money the government must eventually take from taxpayers, making everyone other than the government and those who gain its favor worse off.

There is, however, one thing which typically frustrates the government's attempts to cover up a recession, and that is unemployment. Although the government has a faulty measuring system for unemployment to make the figures look better (reported currently at 9.6%, it is most likely around 16%. For example, if the economy is so bad that people give up on finding jobs, then that causes unemployment to go down by the government’s determination), and although government spending bills typically have provisions to use the government money spent to create jobs, the effect of trying to freeze the economy in the position it was in by propping up failed businesses and jobs by reducing the hours workers actually work is to perpetuate a non-equilibrium in the economy which means massive unemployment. Until a recession liquidates the whole of the malinvestments made during the economic “boom,” businesses won’t start growing and raising the employment level. In Europe, where interventionist measures have been taken farther, the unemployment problem is even worse than here in the US.

For the recession to be over, government bailouts need to stop, restrictions on labor mobility need to be destroyed, the Fed has to stop trying to keep the interest rate at zero, the government has to stop spending money like they’re going to pay with everything with the printing press, and of course, the printing presses at the Federal Bureau of Engraving and Printing need to be shut down for a good long time.