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Facing The Recession

By: Steve Johnson

12/11/2008 - 194 Comments

I have a feeling that our government leaders are on the verge of a new revelation. That revelation is that they need to let the recession run its course before we can return to a growing economy. 

I realize Obama’s current plan is to try to borrow and spend the economy out of the recession. But, Paul Volcker, which is part of Obama’s economic team, knows better than that.  If Paul is allowed to speak his mind and Obama listens, than I think we could see a reserve in strategy. 

The other obvious reason is that the bailouts of the mortgage industry have failed to stop the recession, while increasing the money supply by trillions of dollars – which is going to create a wave of inflation that is just beginning to gain steam.  The inflationary pressures that were building during the summer are still very real, but have been held in check because of the massive deleveraging over the last few months and liquidation of assets. 

Sooner or later, the government economic team is going to come to the same conclusion that Peter Schiff has understood for years that the government cannot stop the recession and the best thing they can do is get out of the way and let it run its course.  The shift from putting our hope in government intervention back to capitalism is going to take a crafty speaker to convince the public that this is the best course of action.

Obama will need to use majestic speaking ability to lead the nation directly into the recession – head on.  Sometime the best way to deal with a storm is to brace yourself and face it head on, rather than getting tossed around while you plead with the storm again and again.

It’s time to face the sins of decades of overconsumption.  This new revelation maybe a few months away, as Obama is probably going to first try his stimulus plan to create 2.5 million new (government) jobs to upgrade infrastructure, but I feel the momentum building that the public and congress are realizing we cannot bail our way out of this recession.  Everyone is beginning to realize that we are facing an L-shaped recession that is nothing like the last two recessions. 

The cure to the recession is to stop consumer spending and increase our savings rate.  Once a consensus is reached and our economic leaders realize the importance that savings plays in a viable economy, they will increase interest rates, which will turn the US face-to-face against the mother of all recessions.  Saving money will once again be rewarded.

When this new direction becomes evident, the key to survival is going to be in bracing yourself for the storm.  Bracing for the storm is getting out of debt and cutting back on everything you can imagine.

Facing the recession will be a battle.  It will be like fighting a war against the economy.  We will need to awaken a fighting spirit within us as we fight for the economic survival of our nation. 

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