Americans have just experienced the biggest drop in homeowner wealth on record according to the July 31^st report online from Bloomberg. The economy according to Bloomberg is twice as bad as anticipated.

Experts are no longer comparing the present economic down turn to the 1980’s and are now saying that this is the worst economy since the FDR depression of the 30’s.

        According to the National Bureau of Economic Research the current decline in the economy started in December of 2008, but is accelerating now and has compared it to the 1930’s during the FDR administration.

In other news Bloomberg reported that the dollar slumped to its lowest level this year. The treasury has to increase its debt in response to the falling dollar by paying higher interest rates. Gold advanced more in the past two weeks then earlier, leading to speculation that the upturn in the current stock prices will be short lived.

The Fed’s are still shutting down banks in New Jersey, Florida, Ohio and Oklahoma.  The worse is not over although wishful thinkers are seizing upon any scrap of good news to say that the economy is recovering. But how can the economy recover if production has not increased, if people are not put to work and earning money in order to meet the supply.

The Austrian theory of economics preaches that when overproduction occurs, prices should fall, labor should accept less or unemployment will result, and the market will adjust. But Keynesian economists, rather than allow the market to correct, rather than allow prices to fall, rather then lower wages, they increase the money supply. People begin to purchase the excess commodities on credit, with more money in circulation production increases in even greater maladjustment, until the economy implodes. At that point the economy having survived on a false demand created by debt financing rather than true demand created by wealth, fails.

The economy cannot and will not recover as long as it is artificially propped up by high wages, high taxes, onerous government mandates, environmental protection production costs which do not add value to the product, but increase its retail price. Government spending does not create true wealth. At least not on infrastructure and other projects that are not lasting, do not produce a product that is in demand, and they do not create permanent jobs, but merely increased the tax burden on an already strapped for cash economy.

Everything that President Obama has done has already been tried by FDR and it has failed. The problem is that historians have distorted the truth. They continue to praise FDR for his programs that saved the economy. The truth is that his programs did noting to create a viable economy and arguably extended the length of the depression of the 30’s for an additional decade.