Lew Rockwell on The War on Recession

It's time that we question the very foundations of this war on recession. The recession is a regrettable but inevitable backlash against a boom that was not justified by the fundamentals.

That last phrase is the critical thing. I am not saying that the recession is the price we pay for economic growth. Boom times are fabulous times, provided that they are rooted in sound fundamentals. And what are those? Essentially it is this: the timeframe of investment must match the timeframe of society at large. If people are long-term oriented and saving money, resources become available for investment in the future. When production is completed, there are consumers to buy. But if no one is saving money and there is no sound store of capital, there are no resources to invest – unless, of course, the Fed creates that money. The money the Fed creates is wholly illusory, a fiction of investors' imaginations. It will vanish when the economy wakes up to reality.

This is an example of investment unjustified by fundamentals. What to do in that case? There must be a correction. There is nothing the Fed or the Congress can do about it. It certainly shouldn't attempt to prevent it. To attempt to prevent the correction is like turning away from the skid: it only makes it worse.

~ Lew Rockwell, "The War on Recession," LewRockwell.com, March 20, 2008