A lot of people are now projecting the possibility of a recession this year. I’ve been one of them. I give it a good chance at about 50/50. But, even if we have a recession, it is not the worst thing that can grip this nation.

When projecting the possibility of a recession, one has to identify a cause. Most recessions are the result of a build-up of mistakes -- mal-investment, over-consumption, and the misallocation of resources. It is the liquidation of these errors that leads to a re-adjustment.

Also, a recession can be due to a financial crisis. But let me point out that with the worst financial crisis since the Great Depression, we only experienced two really severe quarters of negative growth. The "Great Recession” was anything but. The 1980 to 1982 recession was much more severe. 

Click here: The Great Recession? - PaulNathan.biz

And after the 1987 crash, which was greater than the crash of 1929, there was no recession at all. We may indeed have a recession in our future but if we do, unless it's financial in nature it should be mild. There is no mal-investment in the economy today. Investment is down, not booming. There is no over-consumption by consumers, in fact, they are paying down debt and saving more than in recent history. And there is not a lot of misallocation of resources except for the shale oil boom together with the falling world demand for commodities, but the market has been liquidating these mistakes for years.

As for a financial crisis causing a recession, again it should be mild. Leverage has been going down, not up, for 7 years. Cash held by households, banks, and corporations, are at all-time highs. And the reserve ratios of the financial system are at the highest in memory. Only governments are still in trouble, over spending as usual, in historically miserable financial shape, and getting worse daily.

Instead of a booming economy, with progressively higher inflation and interest rates which are the tell-tale signs of a needed correction, what we have today and have had since the end of the recession in 2008 is stagnation. In fact it's the longest period of anemic economic growth in our history.

What caused it?

For the most part it was caused by an army of regulators that took charge of the economy. We have gone from 21,000 pages of regulations before the recession to over 86,000 today. Much of it is due to the take-over of the health and banking industries. Bank regulators now run the banks, bankers don't. Regulators now run the health industry and insurance industry, doctors don't. And the EPA now runs the energy and transportation industry, entrepreneurs don't.

In almost every industry government intervention has taken the place of free enterprise. Employers are even losing their power to set wages. Wages are now the province of politicians or mob rule referendums, rather than things like voluntary contracts between employers and employees, profits and productivity, or supply and demand. The result has been the same result every

time socialism replaces capitalism: stagnation.

Productivity in this country has fallen from a normal increase of 2.3% per year to .07%, a third of normal. And we have more businesses closing their doors than are being created – the opposite of the norm in this country.

And what does the Democratic Party want to do to improve things? They want even greater socialism: more bureaucrats running things, more rules and regulations, more theft through taxation, and more redistribution. These are policies that have failed to improve mankind in every instance they have been practiced. Yet that’s the direction America continues to go.

Donald Trump is no better. He wants to risk a trade war, or a currency war that could lead the world into a depression as it did in the thirties. He isn't against theft; he applauds it when it comes in the form of eminent domain. And he is just as willing to pick winners and losers as are the Democrats. He doesn't want corporations to go overseas to do business. He wants to force them to stay here. So force and theft are high on the agenda of both Trump and the Democrats.

Neither the Democrats nor Donald Trump know what it takes to “make America great again”.

What would create prosperity, higher standards of living and less poverty? Freedom! More freedom from bureaucratic laws that aim to tell others what to do, how to do it, and how much they can charge for it. Hillary would do the opposite and so would Sanders and Trump. They would go after the rich, the entrepreneur, the Wall Street investors, the banks, and the oil industry, and anyone else they can control to make America into their idea of what this country should be. The only difference is one of degree.  So, we have a socialist -"lite" in Hillary Clinton versus a socialist extremist, in Bernie Sanders. And Donald Trump who wants to be dictator, decreeing the things he feel’s is necessary, just like a boss, not a president. We may go from boss Obama to boss Trump -- with little difference to show for it.

People don't have to wonder about what socialism will do to the economy in the future, if either of the candidates above should win. Just look at what socialism has done to the economy and the average worker in the last 7 years. We have gone from a dynamic economy where poverty was not an issue, where wages and standards of living rose for 25 years, and where people were generally happy with the American economy, to 7 years of stagnation. We had 25 years of almost non-stop growth and prosperity under Reagan, Clinton, and Bush. All followed prudent fiscal and monetary policies. The result was an explosion of innovation, creativity, and technology the likes of which the world has not seen since the industrial revolution.  Almost everyone believes things are worse today than they were and could be. Sixty-six percent of those polled say the economy is going in the

wrong direction. They are right!

So here's the point: a recession is not the worst thing that can happen to an economy. A recession, even a depression is a liquidation of mistakes. It is a resolution. Afterward the economy recoups and goes right back to prosperity. The worst thing we can have is what we have now - a slow death that never ends. We are becoming Cuba, where progress disappeared for 50 years. Or Russia, where generations never saw anything like the promises made of a golden era. Or Germany where a strong man took charge and promised greatness through the use of force.

A lot of people sincerely believe we are losing the America we had and that it may never return again. That's why this election is so critical. Either it's more controls, regulations and presidential edicts and mandates from Washington and a continuation down the path we are headed now, or a reversal to a less controlled and regulated society. Government control or individual freedom? That is the battle of 2016. The winner wins not just an election, but the future of America.

Paul Nathan

Paulnathan.biz