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GOOD NEWS! Recovery’s Coming

April 17, 2009

Recovery’s Coming

Economy: The president sees continued trouble for the economy and says only his economic plan can end it. Actually, the recession will soon be over, almost no matter what government does.

The economy’s going to bounce back soon, though you wouldn’t know it to listen to many prognosticators. They’re still talking about a possible depression.

In fact, virtually all the data now out show either a bottoming or slight upturn in activity. As the year goes on, that will gather steam.

Even banks, which we’ve been told hold the key to our future prosperity, are doing much, much better. Wells Fargo and Goldman Sachs both reported record earnings in the last two weeks.

The data being called “grim” or “troubling” — like Wednesday’s report that industrial output shrank 1.5% and year-over-year consumer prices fell for the first time since 1955 — actually show improvement, not deterioration.

Take industrial output. It fell largely because businesses late last year panicked. They cut output to slash inventories, getting lean and mean. As a rebound comes, even a mild one, they’ll ramp up fast to meet demand.

Or take consumer prices. Deflation is a scary thing. But March’s drop in prices reflects the dramatic plunge in oil since last year — which will act like a giant tax cut this year, boosting consumption.

A flood of freshly printed money makes a rebound all but inevitable. The Fed has cut rates to zero. As the chart shows, M2 money supply is rising at close to a 10% rate now. Going back to WWII, a 10% rate of money growth has always led to economic growth.

Then there’s the Fed’s own best predictor, the spread between 10-year Treasuries and 3-month T-bills. At a current 2.65%, that spread shows virtually no chance of recession by year end.

Add to this the fact that U.S. stock markets have added nearly $2 trillion in value since bottoming on March 9. As investment adviser Barton Biggs noted last week, “there have been 40 upticks in key indicators of economic activity around the world.”

So the recovery is coming, ready or not. It’s just a matter of timing. Even the Fed’s own beige book survey of economic activity, also out Wednesday, saw signs of “stabilization.”

We shouldn’t be stampeded by fearmongers into passing more foolish and unnecessary “stimulus” and spending packages that will saddle future generations with trillions in unneeded debt.

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