The Republicans’ Recession Isn’t a Recession

With Californians in distress, will inflation help Republicans take control of the House? By Jovanka Matulich

There’s a lot of talk going around this week, especially after Democrats lost their majority in last week’s election, about the state of the US economy. The Republican Party claims we’re in a recession because many Americans are losing their jobs and the big banks aren’t lending anybody any money.

In reality, the US economy has been in a recession for more than three years now, but this is merely a continuation of the same trend we’ve been seeing for years. Unemployment has been dropping at a snail’s pace, but this trend is just as true today as it was in September 2007 when we first started seeing layoffs and business failure.

What’s most interesting about the Republicans’ claim that America is in a recession, though, is that they are using the same rhetoric as they used in their unsuccessful campaign to take over Congress in 2010. The Republicans claimed we were in a ‘fiscal cliff’, a ‘cliff’ being a term for an event or event’s immediate aftermath that requires a government spending cut or tax increase. The term is derived from the fact that, before the first American dollar was printed, the United States was operating on a gold standard. The United States has, since the time of the first printing press, been operating on a fiat currency standard, with the Federal Reserve printing money directly and issuing IOUs in lieu of currency. Today, we have a dollar with a value that can fluctuate with interest rates, which is known as the ‘fiscal cliff’.

If you take a look at this chart, it gives you a nice snapshot of the recent trend in the US dollar. Since the end of the last recession, the US dollar has fallen by 10%, reaching its lowest level in four years. Now, the Republicans want to try and scare you into believing that people losing their jobs and the big banks not lending is something people are going to live through.

The problem, however, is that it’s almost impossible to see how the economy is currently falling over a cliff. If you look at this chart, the last recession was based on massive government intervention in the private sector. In 2008, the Federal Reserve bought up large quantities of government bonds and gave them to the banks at extremely low interest rates.

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