It's official—The Recession is Over!!!!

Well, at least the experts have declared that the recession is over.  Even they admit, however, that most people won't see any difference.  Sort of reminds me of the Ministry of Truth's report in George Orwell's 1984—the reports said that things were great, annual production numbers were up, but when the people looked around things were terrible.

Just like the Ministry of Truth, government agencies like the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) offer a somewhat skewed version of reality.  Technically, a recession is two quarters of negative economic growth as measured by gross domestic product (GDP).  But does GDP really mean anything?  No, not really.  It is simply a number economists quote when talking about macroeconomics. 

GDP is comprised of four components—consumer spending, government spending, capital investment, and trade surplus or deficit.  GDP is not a "quality of life" indicator.  By that I mean that according to the measurements used by GDP, if government spending increases the economy grows and that is a good thing (it's not)  or if the dollar drops in value exports will increase versus imports simply because American-made goods are now cheaper on the world market.

For a much better understanding of how the numbers with which the government provides us work, check out John Williams's Shadow Government Statistics website.

Yes, economic activity has probably picked up.  It will probably pick up as the government spends more of the "stimulus" money.  Remember how the American Recovery and Reinvestment Act had to be passed immediately or the economy would collapse?  Well, less than a quarter of the money will be spent this year.  Most of this money has been simply wealth redistribution, things like extending unemployment.  But will the quality of life, the standard of living, for the average American get better?

Keynesian economists would have us believe that productivity causes inflation.  In our current paradigm, the opposite is true—monetary inflation drives illusory economic growth.  You can see where this leads.  In order to keep the economy growing, the government has to keep on pumping in more money.  That results in price inflation.  Wages and cost of living adjustments do not keep up with the real rate of inflation which causes the public to become upset.  So the government is left with two options—withdraw the money and suffer a serious recession/depression or experience run-away inflation.  Neither are particularly rosy scenarios.

But, hey, at least the economic reports will sound great.