BETWEEN THE LINES:Soft patch, double dip or something else

For the latter half of the 20th century, the United States was, economically speaking, very bullish. The post-World War II boom launched a feeling of invincibility. There were a few recessions periodically, but for the most part, prosperity reigned. The century ended on an unparalleled boom, which drove the Dow Jones Industrial averages to more than 14,000 as consumer confidence reached historic highs.

The latter half of the century had a few bumps along the way, but most of the recessions that slowed the economy were of short duration ranging from six to 14 months. As the new millennium approached, it seemed prosperity was an American entitlement. Our outlook could be summarized by the 1967 hit "Even the Bad Times Are Good" by the Tremeloes.

However, the new millennium has painted a different picture beginning with the 2001 recession. A few years later, it was followed by the collapse of the housing mania, which was fueled by below-market interest rates to unqualified buyers courtesy of Washington bureaucrats and placed into practice by Fannie Mae and Freddie Mac. Mortgage lenders share in the blame as well. Just like the law of gravity pulls us back to Earth, so do difficult times restore a sense of reality.

The collapse of the housing market, which still has not recovered, proved to be a precursor to the Great Recession of 2008-2009, which resulted in a 57 percent decline in the Dow Jones average. Investors helplessly stood by as the Dow plummeted from a peak of 14,400 to a low of 6,550.

The Federal Reserve, the sole purveyors of monetary policy, countered by lowering the discount rate to zero in the hopes of jump-starting the economy. In the interim, both presidents Bush and Obama felt the need to bail out corporate America under the premise that these financial institutions were too big to fail. The remedies were laws that were not carefully thought through, but passed none the less because, according to our lawmakers, failure to do so would result in the end of the world.

The Fed assumed a similar destructive path by initiating a policy known as quantitative easing, an evasive term for printing money out of thin air with the long-term consequences  of inflation as someone else’s problem. As long as the ship stays afloat, both the Federal Reserve and Washington politicians will say they saved the ship.

In reality, the so-called recovery the past couple of years is an illusion. Unemployment is slightly better because the Bureau of Labor Statistics plays games with the data by discounting long-term unemployment from their figures and other creative accounting measures. When the Dow is priced in gold (real money), it has been in a free fall the past decade. The so-called recovery has been bought at the price of our children’s future.

Optimists will refer to the coming days as a "soft patch," a mere bump in the road. When things continue to go south, it will be labeled as a double-dip recession, when in truth our economy has never really recovered to begin with.

In the coming weeks, Congress will have to make a decision on raising the debt limit one more time. Lies and damn lies will fill the air. If the Republican majority in the House compromises by passing the debt-limit increase based on future promises of reduction in government spending, then they have not learned from past mistakes.

If that happens, the only question remaining is if we will lose what civility we have left when the inevitable economic collapse occurs. By remaining silent over the years as enormous unconstitutional powers were granted to the federal government, we have sown the seeds for our demise. Leases on greatness ultimately have expiration dates as we might someday discover — hopefully later rather than sooner.

Laughlin is a Christian Libertarian. He is an economist, teacher, father, husband and most recently a grandfather. He has written a weekly column for The Tribune for 12 years. He and his wife Gina reside in Meadowlakes. To contact him, email ablaughlin@nctv.com. He is an independent columnist, not a staff member, and his views do not necessarily reflect those of The Tribune or its parent company.