Tags: recession

Fear of Recession Can Create Recession

Wednesday, 13 Feb 2008 02:45 PM

By E. Ralph Hostetter

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Predictions of a recession are beginning to fill news columns of the mass media and blogs on the Internet.

Headlines exclaim: "Banks' Woes May Result in Big Recession" — Journal Sentinel; "Economist Fears 'Nasty' Recession Headed Our Way This Year" — USA Today; "Could the Crash of '87 Happen Again?" — John W. Schoen, MSNBC.com; "Chart-watchers Say Sell before Stocks Plunge" — Louise Yamada, Technical Research Advisors LLC.

It takes a lot more than a few scary headlines to create a recession.

However, these types of scare tactics by a dominant news media create anxiety and fear which can undermine confidence, within both the consumer and producer communities.

As consumer confidence falls, the buying public holds back on purchases and places excess money, that would normally be spent on products, into savings accounts which takes substantial amounts of currency out of circulation.

The producer, facing diminishing markets, is forced to lay off workers, creating substantial unemployment, one of the first indications of the beginning of a recession.

Two consecutive quarters of increased job losses coupled with a decrease in gross domestic product determines the beginning of a recession, according to many economists.

Obviously, the key factor here is jobs. Consumers with jobs spend well. The unemployed spend much less and may eventually become a burden to taxpayers, when unemployment benefits expire.

Currency in the hands of the consumer is the answer to rejuvenating the spending side of the equation.

The President and Congress have decided to pass a stimulus bill at a cost of $168 billion. One hundred billion dollars of that would provide one-time rebates up to $600 for individuals or $1,200 for couples plus $300 for each child. More than $50 billion dollars would be in the form of guarantees to small businesses.

President George W. Bush signed the bill on Wednesday, Feb. 13.

On signing the bill, President Bush added another $100 billion to an already projected budget deficit of $250 billion.

Critics point out this type of solution is nothing more than a redistribution of wealth, one of the principles of Marxism.

Many in the conservative community are objecting to this method of spending America's way out of an approaching recession, pointing out that earning, not spending, is the proper capitalist solution.

Since job loss is the principal cause of recessions, job creation is the solution to ending the recession.

America has an estimated two to three million jobs that are languishing on its doorstep at present. These are good paying jobs, many of which are union jobs, awaiting action from Congress to generate the necessary will to throw the "green" curse off its back.

Congress has the power to open petroleum reserves in ANWR and other areas of Alaska, as well as offshore areas of the Atlantic and Pacific oceans, as well as the Gulf of Mexico. These areas are known to have reserves of billions of barrels of oil.

Oil companies are making enormous profits off the artificially high cost of oil, topping $100 per barrel within the last month.

Exxon made the highest profit in American industrial history, amounting to some $40 billion. Other U.S. oil companies are showing historic profits as well.

The President and Congress should act immediately to clear the way for these enormous profits to go back to the development of resources from which much of these profits came, oil wells.

Failing this, the Far Left in Congress will push for excess profits taxes to confiscate these profits as was done in a similar situation during President Jimmy Carter's Administration.

Had Jimmy Carter given the oil companies the choice of drilling for more oil or be taxed, the oil companies would have taken the opportunity to drill and today we could have had energy independence.

This may be the last chance America has to capitalize on such an opportunity.

The U.S. Congress must act quickly to remove all restrictions on drilling in ANWR, offshore or wherever oil exploration opportunities exist.

The threat of environmental risks has been resolved. Oil spills at offshore rigs have been brought under control and no longer pose the risks that environmentalists keep claiming exist.

Removing the green shackles from the oil explorations and development sector of the American economy will provide those two to three million jobs so desperately needed to support a growing economy.

Once energy independence is achieved, the price of crude oil will seek its own level in the free market.

Oil at $100 a barrel will no longer pose the threat that it does today.

Time can then be taken to build new oil refineries, construct new atomic energy plants and rebuilt the power transmission grid system.

All of these productive moves will generate more and more jobs and extend America’s vibrant free enterprise economy for years into the future.

E. Ralph Hostetter, a prominent businessman and agricultural publisher, also is a national and local award-winning columnist. He welcomes comments by email sent to eralphhostetter@yahoo.com.

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