The Congressional Budget Office has recently issued a federal “Budget Outlook Update” for the next ten years in the context of the government’s fiscal condition in the face of the coronavirus and Washington’s spending spree. The message: the deficit for fiscal year 2020 is huge, and the national debt is getting bigger, faster than had been projected before America’s lockdowns that brought much of the economy to a halt.
Normally, serious recessionary downturns are the result of central bank monetary mismanagement that generates unsustainable investment and housing booms and bubbles through money, credit and interest rate manipulation. Eventually, the credit expansion house of cards comes tumbling down as various sectors of the economy discover the need for a rebalancing of resource, labor, and capital uses in the face of numerous mismatches between supplies and demands.
The Government Directly Caused the Downturn of 2020
There were many signs that ten years of nearly zero interest rates and a large expansion of bank credit were setting the stage for an eventual “correction” in the economy. However “inevitable” this might have been at some point, there was no indication at the beginning of 2020 that a serious recession was on the immediate horizon. No, what happened in the first half of 2020 had one source and cause only – the coercive commands of the federal and the state governments ordering people to stay at home, limit their shopping trips to politically-approved “essentials,” and not to go to work, as all part of a counterproductive and damaging attempt to stop the spread of the coronavirus.
Instead, its most important outcome was to wreak havoc on not just the U.S. economy, but much of the world’s economy, as well, as most other governments imposed similar compulsory clampdowns on the citizens of their countries.
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