Soaring on the Trampoline

Obama's tweet, image found here

Earlier this week, former president Barack Obama celebrated the 11^th anniversary of signing of the “Recovery Act,” a piece of legislation that he claims resulted in our current booming economy. And he has rightly been scoffed for it. 

But it’s a good opportunity to exemplify the trampoline effect, so let’s do that.

The trampoline effect—a term invented by my son Political Sphere—is what happens when there’s interference in the economy. When government reaches in to “help,” it takes the energy out of the natural rebound. It’s like a trampoline, when the jumper is going up and down. After a normal down, the energy pops the jumper back up, at least as high as he’d been before. But if someone reaches in, touches the trampoline and says, “Here, let me help you” while “steadying” the bouncy mat or adding a push that’s out of sync with the jumper, the expected bounce doesn’t happen. Instead there’s kind of a thud, and then tiny bounces leaving the jumper sitting there needing to start over.

The economy is the jumper. There are ups and downs. But natural recoveries follow the downs, so they’re not something that needs fixing, or “help.” Left alone, a down recovers to an up pretty quickly.

When we were all on the trampoline together, "interfering" with each other,
there wasn't a lot of soaring. It was hard enough just to stay upright.
(Yes, the big kid on the trampoline is me.)

Economists might call the trampoline effect an L-shaped recession and recovery. Instead of the expected parabola (a U-shape), the down is followed by a sideways stutter. I’ve written about this here.

An L-shaped recession looks like this, instead of
the mirror-image parabola you'd expect.

In terms of the trampoline, when Obama said we would just have to get used to less growth and high unemployment, because that was the new norm, he was saying, “You’ve got to get used to less bounce in the trampoline; it’s just flatter now and doesn’t go up the way it used to. But imagine how bad it would be if we weren’t doing all the help we’re doing?”

Then Trump comes in and blows that theory away. “Get your hands off, and let’s see this thing fly again.”

One economic indicator is unemployment. This one has the L-shape upside down, since high unemployment is bad and low is good. You can see that the pre-recession low was 4.7 in November 2007. That level wasn’t seen again until November 2016, nine years later later (coincidentally coinciding with the end of the Obama presidency). Even that was somewhat distorted by people leaving the workforce because of chronic unemployment. So, even though there was some steady improvement following a high of 10.0 in October 2009, recovery to the beginning level was still 7 years away. A parabolic recovery (what happens naturally, without interference), should have been an approximate mirror image of the spike, which wouldn't have risen so high and could have recovered around June 2011. Obama's interference added on half a decade of additional pain.

F.R.E.D. unemployment data, found here

It wasn’t a chronic “new economy” to get used to; it was interference taking the energy out of the economy's natural ability to recover. Eventually, businesses and investors had to do what a trampoline jumper does: put some initial energy in again, and get a little going at a time, to try to overcome the interference. And the promise of less interference—lower taxes, less regulation—that accompanied the 2016 election campaign promises followed by policy changes led to economic soaring in the form of unemployment rates not seen in 50 years. And the newer unemployment numbers include hundreds of thousands of people returning to the workforce, which could have made unemployment numbers seem higher.

In other words, in Obama’s L-shaped recovery, unemployment was higher than statistics showed, and under Trump, unemployment is lower than statistics show.

We’ve seen this before. Remember the malaise speech by Jimmy Carter? We just have to get used to high unemployment, high inflation, and low economic growth, because that’s the new normal. But then Reagan came in and cut taxes. And then the economy took off again.

Back in 2011, 32 years after President Carter’s malaise speech, Laura Ingraham put together an audio montage of that speech and Obama’s, to emphasize the repetition. It’s as though they used the same speech writer. 

Why would we resign ourselves to malaise, when we know it’s the interference that’s causing it, and all we need to do is get government out of the way?

What did Obama do to interfere? He grew government, attempted a government takeover of entire sectors of the economy, such as healthcare—and, temporarily, the automotive industry. He raised taxes. He imposed regulations galore. He made planning difficult for businesses, whose plans could be swallowed up in a suddenly imposed new rule change.

He never saw a problem (often government-caused problems) that he didn’t want to "fix" with bigger government.

What did President Trump do to stop the interference? Nowhere near getting government totally out of its overreach habit. But what he has done so far is working:

·         Cut corporate taxes—down from highest rate in the world of 35% to a more middle-range 21%.

·         Cut tax rates for individuals and families (which could, however, expire in 2025).

·         Cut regulations. In his first year, regulatory activity decreased 74%.

o   Dodd-Frank rollbacks affected regional and community banks.

o   EPA regulations that harmed businesses were cut.

o   Departments of Education and Labor are doing some deregulating.

The Trump presidency brought a 74% drop in new regulations its first year.
Chart found here.

·        I saw a quote on Facebook today, along with a question about what we thought of it:

I submit that the government exists to provide for the needs of the people, and when it comes to choice between profits and property rights on the one hand and human welfare on the other, there should be no hesitation whatsoever in saying that we are going to place the human welfare consideration first and let property rights and financial interests fare as best they may.—J. S. Woodsworth

So I responded with the Spherical Model answer:

Government does not exist to provide the needs of the people. The proper role of government is to protect life, liberty, and property. Attempts to do anything else will result in unintended consequences, usually the exact opposite of the stated goal.

If our government would resist interfering to “provide for the needs of the people,” or any other intention beyond its proper role, we’d have a lot more soaring economy, and a lot less thud and malaise.

I’m in favor of soaring.

As I've Said Before

Sometimes it’s worth saying things again. The economy changes, but economic principles don’t. So some of what I’ve written can be said again and apply as well today.

I’ve posted a couple of collections of economic “best of” posts:

·         In June of 2013, Best of the Spherical Model, Part II 

·         In March of 2015, More of the Best, Part III 

Among these are some that I think are repeating in full. These two go together: “Parabolas,” from November 2011, and “The Trampoline Effect,” from March 2012.  When we’re in the longest malaise (being called a tepid recovery) since the Great Depression, maybe it’s worth reviewing these.

Parabolas

Natural paraabolic shape
of a recession and recovery

With recessions, the rule is: what goes down must come back up. The natural shape of a recession is a parabola. There’s a sharp drop to as low as it’s going to go, and then the direction changes upward during recovery. If it is allowed to follow the natural course of events, the recovery will essentially mirror the drop—and then keep going up. 

This is a concept my sons, Economic Sphere and Political Sphere, have been sharing with me from time to time. I don’t have the economic math skills to reproduce all the math logic for you, unfortunately. But I think the basic concept will do. Recessions happen because the market needs to correct, from a bubble or maybe a natural disaster--something that interferes with the natural long-term aggregate growth of the free market. But once there’s a drop, then a naturally growing market returns.  

Political Sphere shared an article from Forbes about the concept that recessions follow a natural course—unless interfered with. The article makes that point that the excuse “this time is different” is never true. 

L-shaped recession, natural
recovery is prevented

Real trouble happens when there is interference, usually intended to “help.” According to Wikipedia, one of the shapes a recession can take is the L shape. In this one, the sharp drop happens just as you would expect. But then, instead of bouncing on the bottom and coming back up, the level just sort of dribbles along horizontally near the bottom. Other names for this are “depression,” “lost decade,” and “malaise.” These are all terms beginning to be applied to our current L-shaped recession. They are terms that applied to FDR’s Great Depression as well. 

What is it that causes this recession to be different, to languish at the bottom instead of bouncing back? Government interference. How do we know? 

This is maybe more than you wanted, but here’s a basic formula: 

Y = C + I + G + NX 

Y is GDP (production) in actual dollars.

C is consumption, which is a function of Y-T (taxes).

I is investment, or infusion of new capital (not spending on used materials, or stock exchanges).

G is government spending.

NX is net exports. 

Government can affect Y by increasing spending or raising or lowering taxes. More taxes means less money for consumers to spend, and less taxes means more money for consumers to spend. Indirectly investment will be affected if Y decreases, when there is less profit to be made. But mainly the other way government can change Y is by increasing government spending.  

I had to ask Economic Sphere why the formula includes “+G” instead of “-G.” In theory, G is just another product consumers (we the people) spend money on. To some degree it’s necessary. So the amount spent on G is just another part of the measure of GDP. However, when spending on government is too high—includes debt—it temporarily appears that the G portion of the economy shows actual growth in GDP. But that is an illusion.

natural ups and downs of
business cycle show a sine wave

It appears, in the short run, that government spending (or stimulus) increases Y. But Y’s rate of growth is, in a natural free market, fairly constant. There is fluctuation, an ongoing sine wave, or little rises and dips, but you can draw a line through that at approximately the natural rate of growth (maybe somewhere near 4%). Government spending can’t change that. It doesn’t affect aggregate supply; it only affects aggregate demand. So it may appear for a time that it has affected growth, but there will be a natural pull back to the equilibrium point where aggregate supply and demand intersect. There will be a correction. So the more government does to try to make the market go up, the greater will be the eventual correction back to the natural rate of growth. 

The longer and greater the government over-expenditures, the more drastic will be the inevitable correction. 

So what happens if government sees that inevitable drop and tries to prevent it—with more government spending? It causes an even greater drop. If the measures are taken after the drop, presumably in an effort to stop more drop or cause a rise, it interferes with the natural recovery. That is what we’re seeing now. 

Greater government spending at a time when great government spending already caused the dip is like hitting the economy over the head and beating it down. Every new interference, every new beat down, leaves the economy languishing down at the bottom, unable to rise because of the repeated drop-causing interferences. When they say, “The economy was in much worse shape than we thought; imagine how bad a shape we’d be in if we had done nothing,” you can know for certain that things are worse because of what they did in their ignorant attempts to control a natural force.  

If government wants to have a positive effect on GNP, it needs to cut spending. Since it can’t (won’t) cut to zero, the next best thing would be to cut to the bare bones of the enumerated powers of the Constitution. At the same time, lowering rather than raising taxes will help. Both lowered government spending and lowered taxes leave more money available for growth.

The Trampoline Effect

The other night I was reading something about the recovering economy—a recovery so tepid we can’t perceive it; instead we must take government’s word for it. Never comforting. And the reading led me to talk with my son Political Sphere about the concept that, the deeper the recession, the stronger the following recovery. I wrote about this principle with more detail in “Parabolas” on November 21^st.

So, we were discussing this concept, and Political Sphere unveiled what he calls the Trampoline Effect. On a trampoline, the harder you come down (from a higher or heavier fall), the higher and more powerful the bounce back up. But if a big brother (yes, he worded it that way, with plenty of extra meanings) steps in to “help,” it doesn’t help. It usually disturbs the bounce, taking the energy out of it, and you end up with buckled knees and a few small bounces fading into flatness.

photo from trampoline.com

Picture the difference between a parabola (the natural down and back up bounce) and what is euphemistically referred to as an L-shaped recovery, but is really just the dribble that happens from interference in the bounce.

Big Brother “helping” is the government stepping in, taking actions that interfere with the energy of the natural growing economy.

So, every time you hear someone say, “We had to do something,” or “Think how bad it would be if we hadn’t taken action,” translate that in your mind to the Trampoline Effect. Does the jumper need you to step in and “help” in order to bounce back up? No, that is going to happen unless you interfere.

A recovery, by definition, is coming back up to at least the starting point. If that hasn’t happened, we’re either still going down, or we’re stuck down flat because of the interference. What we need is for Big Brother to get out of the way so we can make a few small tentative bounces and put our energy into building up a good parabolic rise. But every time he steps in, he zaps the energy out of your bounce and leaves you flagging.

Economic Principles for Volatile Times

Monday we woke up to a sharp 1000-point decline in the stock market, which recovered to down only 500 by the end of the day. But still startling. What caused it? And what does it mean for the future?

Monday's stock market drop, chart from here.

It has something to do with China’s economy, but also a lot to do with American economic policy.

China’s growth has concerned world markets over the past quarter century. But growth—real growth—has to be related to actual creation of wealth. Wealth represents the accumulation of the results of labor. If it doesn’t represent real wealth, but is an illusion caused by printing money, manipulating money supply, then it’s bound to lead to an eventual comeuppance. That has been coming for a while.

Here’s a summary, by Greg Lewis at American Thinker, of what’s been going on there:

The Chinese economy, fueled by state-funded credit and money-printing, has enabled the size of the Chinese stock market to rise to dangerously overblown levels more than 50 times higher than they were only two decades ago….

China’s extraordinary stock bubble has been enabled by some of the most perverse practices ever perpetrated on this planet. Among other things, in order to prevent shareholders from selling their stocks to avoid the losses that it’s clear are inevitable, Chinese authorities have threatened to send police and paddy wagons around to arrest citizens who dare to sell off their investments.

Since the turn of the century, China has been on a state-credit-funded manufacturing spree that has caused the demand for commodities to spike to levels never before seen….

What does China have to show for it? Hundreds of ghost cities, filled with enormous skyscrapers, housing projects, and sports stadiums, along with superhighways to nowhere. They now stand virtually unoccupied and unused…. The problem is that what China has built will produce no lasting return to sustain its economy, and the resulting bust will also cause severe contractions in commodity prices and U.S. and global suppliers’ earnings.

China’s 10 percent annual growth rate over the past three decades is turning out to be nothing less than one of the great frauds in global economic history. …

China is an example on a large scale of the failure of central planning, the failure of tyranny to lead to prosperity.

What is worrisome is how closely our formerly free economy has been following the Chinese model. Lewis adds this:

When you couple China’s unimaginably large and corrupt fiat economy with the fact that the United States has been following the Chinese model on a smaller scale since the crash of 2008, you have the makings of financial disaster. Indeed, in the name of bailing out the big banks involved in the 2008 financial meltdown, our own ignorant Keynesian economics poobahs have engaged in the same fiat currency printing as the Chinese. In addition, in maintaining interest rates at or near zero percent for the past half decade plus, the Fed has stolen upwards of $1 trillion in interest people should have collected on their savings over that time. In the wake of the current turmoil, the Fed is once again backing off raising interest rates.

I don’t know if the blip that happened this week portends huge disaster in the near term or not. But we do know that economic principles are about as inexorable as gravity. Anything government does that interferes with a free economy will increase the pain to come.

Back in 1988, Murray Rothbard wrote a piece refuting the contemporary economists about the causes and cures of the 1987 stock market crash. The Mises Institute shared that piece again this week. Rothbard lists nine myths about that crash and what should have been done—and shows why they’re myths, and what is the truth. The assumptions of the mostly Keynesian (liberal, progressive, central planning) economists was that fine tuning control over money supply, inflation, trade, taxes, and government spending would make things right. They just had to stumble upon the right mix of policy. But here’s the summary point:

The important point about a recession is for the government not to interfere, not to inflate, not to regulate, and to allow the recession to work its curative way as quickly as possible. Interfering with the recession, either by inflating or regulating, can only prolong the recession and make it worse, as in the 1930s. And yet the pundits, the economists of all schools, the politicians of both parties, rush heedless into the agreed-upon policies of: Inflate, and Regulate.

That is the main point of books like Meltdown, by Thomas Woods, which examines the 2008 crash, and The Forgotten Man, by Amity Shlaes, which examines the Great Depression of the 1930s. In addition, the “forgotten depression” of 1921 shows us by contrast what happens when government refrains from interfering. In that stock market crash, President Warren G. Harding refrained from interfering, and let the market correct itself, which happened within a few months. Calvin Coolidge continued the non-interference policies through the 1920s. And it wasn’t that naturally growing successful market that led to the 1929 crash: that was government interference. That crash was actually caused by federal easy money policy (exaggeratedly low interest rates). And the crash didn’t cause the Great Depression. The stock market was well on its way to correcting itself in a quarter year—until the Fed interfered with suddenly tight money. And then Hoover, followed by Roosevelt, tinkered with the market one way after another, keeping the market from returning to prosperity for more than a decade.

In 2012, economist John B. Taylor gave the Manhattan Institute’s Eighth Annual Hayek lecture, “The Policy Is the Problem.” In that lecture he does two things: he defines economic freedom, and then lists the known principles.

What I mean [by economic freedom] is the situation where individuals, families decide what to buy, what to produce—they decide where they will work, they decide how they're going to help other people. But they do this within a framework. It's kind of the American vision, if you like. And that framework involves five things: 1) predictable policy, 2) rule of law, 3) a reliance on markets, which generates 4) good incentives, and 5) a limited role of government.

What we’re looking at this week, and forward, is the result of the Obama experiment in interference. Policy has been unpredictable—changing, added regulations, applied according to crony capitalism rather than predictable law. Markets have been viewed as a measure of unfairness—success means some unfairness to the bottom, rather than entrepreneurial energy. Regulations have been discouraging and the opposite of good incentives. And monetary policy has continued extraordinarily ow interest rates, leaving nowhere to go when a correction is needed.

Capital—literal as well as social respect from other countries—built up over the first couple of centuries has been spent in this socialist experiment under Obama. The market has no chance of returning to growth and prosperity until the interference stops.

As for Monday’s stock market drop, correction depends on whether this government tries to do something about it. They’re already doing enough harm. Could they do more? There seems to be no limit to the bad policies they will try.

The 2008 drop could have corrected quickly with restraint from government. The current Great Recession (sometimes referred to as the historically slowest recovery) is lasting because of government policy. So we’re already down. But I’m sure they could manage to cause us to drop from the current plateau to an even lower one.

Drops naturally correct; it’s a parabola. They naturally bounce back up if allowed to correct. But then there's the trampoline effect—if they interfere, they keep the bounce back up from happening.

Flat Lining

We haven’t done an economic post in a while. Numbers came out last week, at the end of the month, and we can use those. If you’ve been reading this blog for a while, you might be familiar with The Trampoline Effect. We’re seeing that play out yet again, or still.

Growth was an essentially negligible .1 percent for the first quarter of 2014. By comparison, the average growth during recovery-from-recession quarters since that started getting measured in the 1960s is 4.1%. Average quarterly growth during the Obama presidency, which counts technically as an ongoing “recovery,” is 2.2%. In other words, the growth indicator is half what you’d expect if the economy is in recovery.

Employment is another indicator of recovery. The quarterly report looks positive; down by .4% to 6.3%. There are some provisos, however. The report is that 288,000 people were hired in April. However, simultaneously, estimates show 800,000 people dropped out of the work force—so they’re not counted in the unemployment figures anymore.

These are estimates. There’s a margin of error of around 300,000. So we get a better idea of the real picture averaging out several months. March showed an increase of 500,000 joining the labor force. If you take the two months together, you get an average of 150,000 leaving the labor force for each of those months, which is probably closer to the truth. But if it makes you feel a lot better than only 150,000 a month are so discouraged they are no longer even looking for work, you’re probably a little warped (or probably an Obama acolyte).

Full employment is traditionally considered 5% or better. There’s always some, because there are always individuals changing, or graduating from college and starting out, or deciding to start or stop an entrepreneurial enterprise, etc. So 5% means, if you’re a job seeker, you’ll probably be able to find a job, given a reasonable list of skills and good work ethic. The rate was 4.7% around the time of the 9/11 attack in 2001. That caused a fair amount of economic and social upheaval. Still, the highest annual unemployment was 6% in 2003, garnering a great deal of complaints from the democrats. It dropped down below full employment levels within a year.

You’ll recall that the current recession hit in late 2008, while Bush was still president (but two years into having Congress controlled by the democrats). Unemployment suddenly spiked to 5.8%. Then Obama and company took over—and it "recovered" to 9.3% in 2009, and “recovered” further in the wrong direction to 9.6% in 2010. It has slowly been dropping since—still lingering well above the post-9/11 economic recession that was so unacceptable at the time, six years into this mythical “recovery.”

The reason we need to combine this unemployment report with the number leaving the labor market is that the unemployment percentage is becoming less and less accurate. That number only counts those currently qualifying for unemployment compensation, plus a certain number added in based on phonecall polling. If someone no longer gets unemployment, they are not counted. We know the percentage of the population gainfully employed is going down—now 62.8%, the lowest it has been since the 1970s malaise. Maybe you remember that time, when President Carter gave a speech telling us to expect this to be the new normal.

Fortunately, Carter was wrong; that was not the new normal. That was the normal result of government interference policies. After a couple of years of Reagan removing impediments, growth and prosperity ensued, as expected.

Recessions are parabolic; when economic indicators fall, they naturally rise back up. However, there’s a trampoline effect; if government “helps,” it takes the energy out of the recover, so it doesn’t bounce back up, but dribbles along at pretty nearly a flat line, sometimes referred to as an L-shaped recovery.

This employment-population ratio illustrates
the L-shaped "recovery," from here

What is the solution—every time? Get government to stop interfering. Allow the hard-working, enterprising, creative population that is our greatest resource to do its thing, unhindered.

We know those in the current administration are not interested in an actual recovery; those power mongers benefit from a larger populace that feels helpless and turns to government for “help.” They will lie about and spin the numbers just enough to persuade those not paying attention to believe they are doing what they can under difficult circumstances—so they can keep getting elected. They hide the fact that this is the worst "recovery" since the Great Depression--which also lingered because of government interference.

We need to break through that haze and let people know—it doesn’t have to be this way. We can have freedom, prosperity, and civilization. We know how. We need to get those who are thwarting us out of power, and find followers of our founders to replace them.

On the Money

There are big things worth talking about this week. There’s a giant storm about to hit landfall on the east coast. There is more clarity coming out piecemeal on the Benghazi story (all of it looking bad for the President). So, in a way, talking about economic issues today is a bit of a break from more pressing issues. Still, I think most people are making decisions this election based on their personal economic issues than on any other reason. So, one week out from the election, the economy is probably worth a post.

There are technical indicators marking when a recession hits bottom and is about to bounce back up to the higher place it plunged from. Supposedly those indicators showed up in June 2009. If it is true that we’ve been “recovering” since that time, then the question remains, why haven’t we bounced back up?

I wrote about the expected bounce back up in March, in a piece called “The Trampoline Effect,” a description provided by my son Political Sphere. I also wrote about it in a piece last November called “Parabolas.” If a recession hits bottom and then lingers there, rather than bouncing back, it is because someone/something is interfering with the natural recovery process.

There’s a piece from Friday’s Wall Street Journal, called “Chronic Fatigue Economy,” spelling out what this bounceless recovery looks like. It shows that the 2% 3^rd quarter growth for 2012 pulls the year’s growth rate all the way up to 1.7% Last year’s growth was 1.8%. 2010’s growth was 2.4% So growth is not only sluggish; it’s slowing. In the entire 13 quarters of “recovery,” only two quarters (in separate years) have reached 3% growth. Typical cumulative growth at the 13-quarter mark of the past 9 recoveries averages 16.8%; this recovery is up to a cumulative 7.2%.

Then there’s the problem of how we got even the meager growth we got. Federal spending rose 9.6% in the 3^rd quarter of 2012; overall government outlays rose 3.7% (that means, I believe, state and local government outlays in addition to federal). Of the 2% 3^rd quarter growth increase, an estimated 0.7% can be chalked up to government growth, which means private growth was closer to 1.3%.

But maybe things are about to get better? Probably not. Business investment dropped, and business investment has to come before job and wage growth. So this is not the time to hope that Obamanomics is just moments away from bearing good fruits.

Here’s another way to think about it, from the WSJ story. If this recovery had been an actual recovery, as was Reagan’s,

That’s about $1/2 trillion in foregone output. The budget deficit would be half as large today if this were a normal expansion.

Large deficits themselves contribute to stalled growth. According to Michael J. Boskin of the Hoover Institution,

[L]arge deficits potentially cause two separate but related problems—shifting the bill for financing the current generation’s consumption to future generations and crowding out of private investment. Thus, deficits are more problematic during economic expansions, if they reduce domestic investment and hence future income, when the national debt is high or rapidly rising relative to GDP, and when they finance consumption, not productive public investment.

The large deficits and expansion of the national debt since the end of 2008 are unprecedented since World War II. The debt-GDP ratio will have doubled, from 40.5 percent to almost 80 percent, by next year. Every year since 2008, the budget deficit as a percentage of GDP has been larger than the previous post-World War II record of 6.0 percent in 1983.

Obama’s economic plan is to “make the rich pay their fair share,” which, translated out of non-progressivist lingo, means “take more money from those who have made it and put it in government’s hands, so that it can’t be used to invest in business growth.” At some point the hidden borrowing, and associated hidden costs to consumers, from federal printing of money not connected to production of actual wealth, will hit a limit, what people are referring to as the fiscal cliff. Until that happens, what we have to look forward to is this new pathetic normal. As the WSJ put it, “We borrowed $5 trillion and all we got was this lousy 1.7% growth.”

Or, hopefully in the nick of time, we can turn to Romney’s plan to set more money free in the private sector: get rid of Obamacare, cut overall tax rates, reform and simplify the tax code to make it less worth avoiding, get rid of unnecessary regulation and do everything conceivable to encourage private sector business. It looks like a clear choice to me.

The Trampoline Effect

The other night I was reading something about the recovering economy—a recovery so tepid we can’t perceive it; instead we must take government’s word for it. Never comforting. And the reading led me to talk with my son Political Sphere about the concept that, the deeper the recession, the stronger the following recovery. I wrote about this principle with more detail in “Parabolas” on November 21^st.

photo from trampoline.com

So, we were discussing this concept, and Political Sphere unveiled what he calls the Trampoline Effect. On a trampoline, the harder you come down (from a higher or heavier fall), the higher and more powerful the bounce back up. But if a big brother (yes, he worded it that way, with plenty of extra meanings) steps in to “help,” it doesn’t help. It usually disturbs the bounce, taking the energy out of it, and you end up with buckled knees and a few small bounces fading into flatness.

Picture the difference between a parabola (the natural down and back up bounce) and what is euphemistically referred to as an L-shaped recovery, but is really just the dribble that happens from interference in the bounce.

Big Brother “helping” is the government stepping in, taking actions that interfere with the energy of the natural growing economy.

So, every time you hear someone say, “We had to do something,” or “Think how bad it would be if we hadn’t taken action,” translate that in your mind to the Trampoline Effect. Does the jumper need you to step in and “help” in order to bounce back up? No, that is going to happen unless you interfere.

A recovery, by definition, is coming back up to at least the starting point. If that hasn’t happened, we’re either still going down, or we’re stuck down flat because of the interference. What we need is for Big Brother to get out of the way so we can make a few small tentative bounces and put our energy into building up a good parabolic rise. But every time he steps in, he zaps the energy out of your bounce and leaves you flagging.