The Current Recession: Market or Government Failure?

This is Rorschach test for those who choose to believe in free markets or state control of the economy. But first, my explanation.

In all the years before modern controls, free financial markets regulated themselves. Severe bubbles were rare, but economic cycles were common, as they are now.

Yet recessions were self-correcting, because they were market-oriented. Every economic downturn was brief, self-repairing by inherent market instincts.

There were no strict regulatory powers around, with no artificial tinkering and meddling from the use of human economic theories. And no political efforts for any correcting stimulus. Yet, the steeper the downturn, the faster and sharper the recovery in every instance.

The problem with a stimulus is that most are political and have no real economic function. Moreover, they are usually the wrong kind. That is, they are made to act too far in the future. They begin to work after the actual economic recovery. Natural market repairs are much faster than a political stimulus.

A stimulus as we know it is merely a misnamed bait and switch device. It should instead be called what it actually often is, a political slush fund.