This Recession is NOT Different! It is Depressingly Familiar.

Excerpts from the July 3, 2009 issue of the Technical Trader Report
Author: Jon L. Johnson

Over the past week people are stating "This is not your father's recession." Today one fellow said that this is a different recession, of a kind we are not used to. I would posit that that is EXACTLY our father's recession. The reason I say that is because I was a kid in the 70's and I lived through that recession but my father was a worker during that time. This recession that we are having is very much the same kind that we had in the 1970's. We had the oil shock, regulation, money printing that debased our currency and ignited inflation pressures. This recession has the same catalysts and responses. There was the oil shock at $140 a barrel last year. The same monetization of the oil shock and response to economic slowing has sewn the seeds of inflation. Regulation is again exploding and we have adopted a lot of governmental policies that are bent on spending versus actually encouraging economic growth.

Those are the same mistakes that made in the 1970's. From Nixon, to Ford, to Carter, it was one boondoggle after another. During the 70's the blue chip stocks - really all stocks - were losing most of their value, the economy was slack (that is the best you can say for it right now), there was high inflation, and there was high unemployment. That's what we have now and it is getting worse, heading toward the 1970's levels. On top of that, the government in the 1970's did nothing substantive, at least in terms of positive impact, to help the situation. The government was regulating and the government was spending. Regulation and spending do not - I repeat - DO NOT result in economic recovery. The result was that we had 10 hideous years until Reagan took office. Then we had a tough recession - the end of the 10-year recession - as President Reagan and Fed chairman Paul Volcker broke inflation's back. What they did was put forth the right kind of fiscal stimulus, coupled with tough monetary policy that actually raised interest rates. People thought that was crazy with the inflation and high unemployment, but Volcker raised interest rates, and combined with the Reagan stimulus helped quell inflation. It also spurred massive investment in the United States and we rode the resulting boom for the next 20-odd years until we managed to kill it off with this profligate spending once again, under Republican and Democrat administrations.

Sadly, as noted, we are doing the same thing once more. When you look at the stimulus bill, there are a lot of things that they call stimulus, such as the healthcare records and the green initiatives. However, of the $800B+ in stimulus, only a paltry $50B has actually hit the economy at this point. I believe you can go to a place called www.stimulus.gov and see the results of that spending. None of that is stimulating small business or really any business to invest in themselves or in the United States. I have talked to many small businesses, and NONE of them have received any stimulus or are in any way induced to spend or invest regarding their businesses as a result of this stimulus package.

What we are getting from the stimulus are companies such as GE and its CEO Jeff Immelt coming out and buddying up with all of the administration officials about the green initiative. Wal-Mart Wednesday came out and said it really liked the proposed healthcare plan even though details are fuzzy. Why? Because it will benefit WMT. Beware when the government shows up and says "I am here to help," and you should also beware when mega corporations come out in support of massive government spending programs. They are basically governments themselves and they see this as a benefit to their bottom lines. You might think that is fine, but what benefits a few mega-corporations is not usually good for all of America. Immelt and GE see their savior as this green initiative. They feel they can take their light bulbs and other aspects of the company and use the green initiative as a massive profit center, using our tax dollars to pay for it before trying to sell the stuff back to us. Beware. Wal-Mart sees profit potential because it has its in-store clinics and it wants to latch onto the government and use that money to funnel profit into its coffers, again using our tax dollars to make money for itself.

My wife saved me money one day. She went out and bought a bunch of stuff that was 30-40% off. She spent several hundred dollars and came back telling me what a great job she had done saving me money. That is exactly what GE and Wal-Mart are promising when they stump for these massive government spending programs that do not add anything to the economy - all they do is take money from taxpayers, whether they be individuals or businesses, and allow a few big enterprises to retool their businesses.

It is a fact that large corporations are not the job creators in the United States. I have researched the issue on several different occasions, and even the Small Business Administration figures bear out, that small business creates the lion's share of jobs. It is well accepted that small businesses create 70% or more of the jobs in the country. Look where all of the jobs in technology came from in the 80's: companies like Apple, Microsoft, Cisco - those start ups that had the new and better ideas. They are the ones that created the massive job growth - the start ups, the new ideas that catch the next wave of technology or the next wave of invention. Conversely, initiating programs that tax American citizens to for initiatives that only big companies can take advantage of and use as profit centers is not going to create more jobs. It will only rescue these companies that need some form of their own government bailout. That is why they are out there so vigorously promoting these programs. Again, beware. Let your Congressmen know that that is not what you want because it is not good for the country and it is not good for you.