According to an article in the New York Times, Google is starting up investment and hiring operations again.
Google is a good economic indicator because its dependency on advertisements speaks well of consumer confidence. Combine that with reports of the GDP rising 3.5 percent this quarter which Washington is singing the praises of.
While most economists believe this growth will not be nearly as high in the next few quarters, these are indicators which hint at an end to the recession period of the U.S. economy.
As great as it sounds, economist John Williams contends most of the growth came from stimulus-type packages, such as tax credits for first-time home buyers and Cash for Clunkers. Non-recurring stimulus money only gives the illusion of a saved economy.
The economy may climb completely out of the recession, but it is very difficult to sustain steady growth with inflation and debt so far out of control. The Federal Reserve Bank simply prints the money it needs and inflates the currency to unprecedented levels. If GDP goes up, then it is assumed the economy is saved and politicians are lauded for fixing the failures of the free market.
One statistic the Obama administration is determined to bring down is the unemployment rate. Unfortunately, that number is the biggest it has been in a long time, about 6 million. One way the U.S. government has tried to combat unemployment in the past is through government-sponsored projects which supposedly create jobs out of thin air.
The problem is the government is paying not only for the labor but also for the materials involved. This tax money is taken from the individual, which could have been used to purchase the goods or services they wanted to buy. Instead, taxpayers fund projects of very little relevance to most people under the guise of job creation. Creating jobs is a product of people investing money in projects they think will be profitable. Projects ordered on the whim of a politician do not count as sustainable economic growth.
Economist H.J. Haskell drew comparisons in the 1930s between the New Deal programs and the Roman Empire. He argues former President Franklin D. Roosevelt was not the first to push federal farming programs and other projects; the Romans did this with projects like the aqueduct. The aqueduct took many workers and cost a great deal of money just like many of the projects the U.S. attempts.
Another trend we see in common with the Romans is rampant inflation. Financing big, expensive government initiatives usually involves devaluation of the currency. Government intervention can only go so far in propping up an economy before it eventually fails.
Major inflationary government policy is not that old in America. The Federal Reserve was created in 1913, and the 1930s brought about the conception of many of the deficit spending policies. The lack of perspective makes it hard to predict what policies involving so much government intervention into money and markets will hold for the future.
So, is the recession over? It seems a bit unreasonable at this point to call the recession over just because of a few indicators when unemployment, inflation and debt continue to be high. Foreigners are also paying considerably less of the national debt, which indicates some loss in confidence abroad. The money supply is inflated right now, and investment may very well rise in the near future. Unfortunately, beyond that, many economists believe another sharp downturn will occur when the money supply tightens and all the businesses being propped up by the government fail.
Derrick Godfrey is a junior majoring in economics. He can be contacted at [email protected].