NOT YOUR FATHER'S BUSINESS CYCLE

I listened to a financial analyst on CNBC this morning who kept talking about where we are in the business cycle. In the normal business cycle, unemployment keeps going up even after the recession is over. In the normal business cycle, corporate profits pop due to layoffs and efficiencies imposed by companies. “In the normal business cycle…in the normal business cycle…in the normal business cycle...”

I tried to follow what the guy was saying. In “normal” circumstances he would most likely be correct. But we are not living in normal times, and any economic recovery will be tenuous at best, if it comes at all. The rules of capitalism have been breached. The invisible hand of economics has been severed.

The country will not experience a normal economic recovery because the government has intervened in ways it has not done so before. Not only that, the government has promised to keep intervening in all aspects of our economic life. This fosters uncertainty and fear. How can any business person plan for the future when the unpredictability of the current administration makes any future assumptions more fiction than they normally are? With fear of higher taxes, the falling dollar, cap and trade, health care changes, income redistribution, salary caps, government competition with private enterprise in the auto industry, the banking industry, and the health care industry, why would any sane private business planner spend one thin dime? He won’t, and the economy will continue to stagnate.

What has allowed the economic dynamics of our economy to excel in worldwide competition has been the relative stability of our system. Our rule of law has always given a firm base on which to build an economic structure. Predictability and reliability are the cornerstone of our free enterprise system. That has been shattered.

The Obama administration has spent so much money it has undermined faith in our economy not only here at home, but abroad. There isn’t a day that goes by when there isn’t a news story reporting that the International Monetary Fund, the United Nations, and the likes of OPEC are secretly gathering to eliminate the dollar as the world’s currency of choice. The price of gold is going through the roof. The government printing presses have been turned on. Interest rates are at zero.

The deserved fears of massive deficits of catastrophic proportions are further bolstered by governmental intervention into bankruptcy proceedings, picking and choosing winners and losers in the supposedly free marketplace, subverting the rule of law. Government ownership in failed American businesses changes the rules of competition.

Add to the mix the Obama administration’s attempt to penalize American manufacturers through its draconian cap and trade plan. Meanwhile, back in Beijing, China has been quietly buying up all of the oil it can muster from just about every oil producer in the world. When there is a recovery, China’s current activities will drive the price of oil through the roof, making the spike of 2008 look like a walk in the park. Here is a news flash: China doesn’t give a good damn about climate change.

And don’t forget Obama’s bent to reward his union buddies, representing less than 12% of the American work force. Don’t forget the rising minimum wage. There is a real job creating policy.

So, let’s assume you are person who is of entrepreneurial spirit and want to open up a donut joint. Knowing that you may end up paying your worker’s $10.00/hour, knowing that any profits you make will be taxed at increased rates to “spread the wealth around,” knowing that you will be penalized if you don’t provide health care to your workers, knowing that you will have to spend huge amounts of money for “green” lighting, heat, and air conditioning, knowing that your employees will be encouraged to unionize….

Just how willing would YOU be to make such an investment? I thought so!!! No, this is not a normal business cycle. This time it is different, and this is the first time I believe it.

One postscript: if you are watching the rise in the stock market, it's not based on what is happening in the United States. It is based on what is happening in the rest of the world. The market can rise without any meaningful job recovery here. Just a thought, and one that is unsettling. Let me know when the real business cycle starts again...if it ever does.