Peter Schiff: There's No Pain-Free Cure for Recession

Once again, Peter Schiff is the voice of reason and common sense. With bailout mania in full swing, he asks us to think about what we're doing. (Read)

As recession fears cause the nation to embrace greater state control of the economy and unimaginable federal deficits, one searches in vain for debate worthy of the moment. Where there should be an historic clash of ideas, there is only blind resignation and an amorphous queasiness that we are simply sweeping the slouching beast under the rug.

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Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.

On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated.

I bolded the last line. It's so true. If it defies common sense people are secure with the thought that people smarter than themselves are taking care of it. I remember getting into an argument with a person about some "modern art" painting of a few colored lines on a blank canvas. I said I thought it was garbage, a joke. The guy countered, with: "How the hell to you know? There are experts out there who think it has value." He admitted he himself didn't see it. People are too willing to trust the experts, instead of their own eyes. (But I digress.)

Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the overnment chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.

I've never had a bleaker feeling for the future. The media are ignoring the situation. All we get are People magazine type shots of the President-Elect on the beach.