If you watch the establishment media, things seem rather rosy with the economy, as they almost always do. It is surprising that some are admitting we may see a recession this year, but most of them are quick to say that it should be mild.
On the other hand, if you find alternative views, it is easy to find people who make it sound like the apocalypse is coming soon to a town near you. I’m not saying that their predictions are impossible or that they definitely won’t happen. At the same time, it is important to realize that life usually goes on.
As long as we don’t have an all-out nuclear war, life should go on, even if the economy is bad. It will be a struggle for many, but most people living in a first-world country should be able to survive.
While I think a recession is inevitable because of past government and central bank policies, the economic future isn’t written in stone either. It really is possible that we could have a hard recession that somewhat quickly (within a couple of years) turns around.
The 1970s were a rough period with stagnation and high inflation. When Paul Volcker entered the Fed and allowed interest rates to dramatically increase, we saw recession for a couple of years in the early 1980s. But the correction, which truly was a correction, was allowed to take place, and we saw relative boom times after that.
In other words, no matter how bad the economy may be, it is possible to have great economic times in the near future if the right policies are enacted, which mostly means getting rid of bad policies.
Sure, there is a misallocation of resources. The correction is an attempt to correctly reallocate those resources in accordance with consumer demand. Some of the wealth, or what was thought of as wealth, is destroyed. But after a recession, the technology is still there. The things we have learned should still be there. The production capacity is still there. So it is quite possible to recover quickly. In fact, if there is minimal interference, it is likely that things will recover quickly.
From Rags to Riches
There is an even starker example than the 1980s in the United States. Think about Japan and Germany after World War 2. These two countries were close to obliterated. When we talk about destroyed wealth, they literally had destroyed wealth in the form of buildings turned into rubble.
Luckily for the people there, the governments of Japan and Germany adopted relatively free market policies shortly after the end of the war. And it followed that these two countries saw great prosperity after this time, in spite of the war devastation.
You can see many other examples of countries that became rich and prosperous after adopting free market policies. Places like Singapore and Hong Kong became some of the richest places on earth. Dubai is now a very wealthy place due to the lack of economic controls and taxation. Despite what some think, it is not primarily due to oil.
Even China is an example of an impoverished country that rose up quickly after allowing some market policies to be adopted. It is amazing what people will do and accomplish when they are allowed to flourish.
Japan and Germany were a mess after the war. China, in 1980, was extremely poor due to the communist economy. So these countries started at a very low point.
The United States is generally a rich country today. It’s just that a lot of resources are wasted on the welfare and warfare state. While some of the wealth that appears on paper may be fake (think of stocks and cryptocurrencies), a lot of the wealth we have is very real. Americans generally enjoy nice houses, nice cars, and an overall good standard of living compared to much of the rest of the world. I say that with the full acknowledgement that many families are struggling to pay their bills these days.
The point is that the United States of today isn’t going to be a rags to riches story. It could be a story of rich to richer.
If free enterprise is just allowed to breathe a bit, it is amazing what entrepreneurs can do. Even in our environment of regulation and high taxes, entrepreneurs and companies still find a way to satisfy consumer demand in many ways. It is just more expensive for both parties than it needs to be.
If total government spending were cut by just 25%, and the worst of the regulations were repealed, we would see a boom unimaginable today. We would see business activity soar, savings soar, and consumer goods getting cheaper and better over time.
We need to dramatically reduce the size and scope of the state, which also includes the Federal Reserve. If the government stopped running up the debt, then the Fed wouldn’t have to monetize the debt to help fund the government spending.
There is no reason we can’t have the growth of the 1950s or the late 1800s with today’s technology. It is amazing how much technology has advanced with a big presence of the state. Just imagine how rich and prosperous we could be if we let economic freedom prevail.