Fraud: Why The Great Recession

Free markets are not to be blamed for the Great Recession. On the contrary, its origins rest upon the deep government and central bank intervention in the economy. Through fraudulent mechanisms, this causes recurrent boom and bust cycles: bad policies create phases of irrational exuberance, which are then followed by economic recessions, a result that every citizen ends up suffering from.

The above blurb is the lead-in for the new documentary on the causes of the Great Recession, “Fraud: Why The Great Recession”. It is a brilliant production from an Austrian economic theory viewpoint. The great thing about it is that it takes a more European view of how the Great Recession affected them as well as in America. Production values are excellent. You can also contribute to the producers via PayPal, as I did, since this is a crowdsource funded project.



Hat tip to our friends at the Truman Factor in Spain.


7 comments to Fraud: Why The Great Recession

  • Rick Marchetta

    I recommend the book The Financial Crisis and the Free Market Cure by former BB&T CEO John Allison for an in depth analysis of how government intervention and crony socialist policies created the crisis and how a separation of state and economy is needed if we are to prevent further erosion of our liberty and our economy.

  • Hans

    I completely agree with the “blurb” that this is a govcession..

    Had we allow the free markets to work (no Bank Bernank)the economy would have already return to norm…

    I apologize to the geniuses at the Central Bank for debasing their economic acumen..

  • Economists want to blame the Great Recession on sub-prime. I suggest it was demographics. Supply-side debt expansion will not work in a shrinking consumption environment.

    The Great Recession was primarily caused by the collapse in economic demand as 80 million “baby-boomers” born between 1946 and 1964 moved out of their peak spending years in their mid-30s to mid-50s and into retirement in their late 50s and early 60s. The U.S. government over the last five years squandered $7.6 trillion on Keynesian demand-side stimulus trying to resuscitate this demographically shrinking demand. With only 23 million born between 1995 and 2012 that comprise “Generation Z”, this population is just too small for demand-side stimulus to revive the economy. America is now deep in debt, facing 23 million unemployed, and needs to fund the baby-boomer’s retirement. Consequently, politicians are being forced to abandon demand-side stimulus and re-embrace supply-side economics.
    The Revolutionary War was sparked by Great Britain’s demand that the American Colonies pay increasingly higher taxes to support England’s expanding national debt. Once independent, Congress adopted the Tenth Amendment to the Constitution that created a “free-trade-zone” between the states and passed the Sinking Fund Act of 1795 to require a significant amount of tax revenue be set aside each year to quickly pay-off any outstanding national debt. These policies created an economic boom that allowed the United States to be debt-free by the 1830s.
    This concept of encouraging long-term economic growth by lowering taxes on income and reducing regulatory burdens that serve as barriers for people to produce goods and services is referred to as “supply-side economics.” The Founding Fathers understood that a greater supply of goods and services produced increases demand by lowering prices for consumers.
    But during the Great Depression, Washington politicians abandoned supply-side and imported Keynesian “demand-side” economics from Great Britain. Demand-side economics argues that in the “short-run” productive activity is influenced by aggregate demand (total spending in the economy) and that aggregate demand may not always equal aggregate supply (the total productive capacity of the economy), because private-sector decisions often lead to “inefficient market outcomes”. Therefore, government should create demand through targeted spending. Armed with this smoke-screen, U.S. short-term spending has risen every year since 1948 as politicians always found some inadequate market demand that needed more spending.
    President Ronald Reagan revived supply-side economics in the 1980s with Reaganomics. The policy ended the oil windfall profits tax to stimulate oil production, passed the Tax Reform Act of 1986 to cut taxes and eliminate deductions, and instituted a payroll tax to begin a “sinking fund” to reduce the accumulated liability of Social Security and Medicare. Although Reagan was never able to reduce total spending, he did start a huge economic boom that lasted until 2001 and led to huge United States treasury surpluses in the late 1990s.
    Most Americans do not realize that Reagan’s biggest ally for his supply-side encouragement of economic growth was the demographics of the baby-boomers. Studies demonstrate that 50% of all durable (cars and houses) and non-durable (food and clothing) expenditures are directly related to household demographics. Spending tends to peak as families grow and people reach their mid-30s to mid-50s. Then spending declines rapidly after the mid-50s.
    When Reagan began Reaganomics in August 1981, the first baby-boomers born in 1946 were just turning 35 years old. By the time those first baby-boomers hit 55 in 2001, the NASDAQ over-the-counter index of growth stocks had risen 2600%, from 190 to over 5000, when the first boomers hit 55 in 2001. As the boomers hit 55 and begin to retire through 2019, only 30% as many Generation Z members will replace them in the work force.
    Politicians love demand-side economics, because they get to look busy spending lots of money creating “demand” for their crony capitalism friends. On the other hand, a part-time Congress could manage a supply-side economics, because the policy is set once to encourage long-term economic growth. But as we have been observing, the United States government will go bankrupt long before politicians can “create” enough demand to replace the shrinking consumption spending as the baby-boomers continue to rapidly retire. Having tripled the national debt since 2001 and recently suffered a credit downgrade, Congress has no other viable option than supporting a return to supply-side economics to encourage growth.
    I expect Congress to soon update President Reagan’s play-book for supply-side growth. The United States has the world’s largest oil and gas reserves and last year those proven reserves rose by the highest amounts ever recorded. Much of the un-tapped oil is on federal land and Congress will begin deregulating the energy market to capture huge royalty payments on higher energy production. Congress will also deregulate the utility industry. This will encourage up to $6 trillion in private-sector capital spending for new pipelines and refineries across the nation to connect and distribute new production. Corporate taxes and crony tax deductions will be slashed and individual taxes and deductions will be reduced. America is on the verge of a huge economic expansion. Enjoy the ride!

  • mak

    As Chriss point out, economics,depressions and recessions are multi-faceted. They will occur no matter what…but, it’s government meddleing that draws out the good and especially the bad. In my humble opinion, the housing mess is the perfect example. If I saw it coming, then everyone should have. I was screaming, appartenly to the wall, “raise the interest rates you fools”….but no, everyone should have thier own home, even if they couldn’t afford it….sigh….

  • Hans

    The right honorable, James Grant’s, thought regarding interest rates and our economic debacle..

  • ohioralph

    Chriss Street, you are not smart enough to predict what Congress will do or what 300+ million want and will do. Supply side economics is just another name for Keynesian Economics.

    To base economic growth on a resurgence of energy production within the U.S. is fool’s play. Energy prices on the world market may be lower than in the U.S. What then? Intervention in the market whether by regulation, tax deductions is a lot of nonsense.

    I suggest you watch the video posted by Jeff.

  • [...] Watch this excellent video titled “Fraud: Why the Great Recession“. [...]