Don't Call it a Recession!

Also available at Mises.ca minus the swear words and other fun stuff

“But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957–58. For since then, we have only had "downturns," or, even better, "slowdowns," or "sidewise movements." So be of good cheer; from now on, depressions and even recessions have been outlawed by the semantic fiat of economists; from now on, the worst that can possibly happen to us are "slowdowns." Such are the wonders of the "New Economics." -- Murray Rothbard, Economic Depressions: Their Cause and Cure

Forty-six years later and Bank of Canada Governor Stephen Poloz has jumped on the semantic fiat bandwagon, calling the “r” word unhelpful. What Canada experienced in the early months of 2015 with the drop in oil prices and its subsequent effects was merely a “mild contraction.”

Okay folks, show's over, nothing to see here, show's ov-OH MY GOD!!!!

Economic affairs cannot be kept going by magistrates and policemen. - Ludwig von Mises

"I just find the discussion quite unhelpful," Poloz told the press, "It's especially unhelpful when what has happened to the economy is very narrowly defined."

Yes, narrowly defined to the oil and gas sectors. The other 80% of the economy is doing just fine thank you very much. All those service sector jobs and real-estate related industries, like construction and banking and insurance. Nothing to worry about! Never-mind the fact that energy is a major export and that without these exports there are no imports. Imports that facilitate the real estate, construction, and service sector.

Now even Poloz isn't that fucking stupid. He did mention the “outsize effect” where the oil and gas industry slow-downs start to affect the broader economy. But, remaining in a state of Keynesian ignorance, Poloz felt bold enough to proclaim: “The Canadian economy is undergoing a complex and significant adjustment.”

It is going through an adjustment. Sometimes by the mild contractions of additional credit the central bank and the Chartered banks have been flooding the system with. Through artificially low interest rates, the Bank of Canada has set the country up for economic bust. That is, real physical resources are getting transformed into real goods and services by real people through real-time which no person can ever realistically reverse even when they really want to.

In the 19^th and early 20^th century the Marxists believed they could not only mimic the free market but do a better job. It's like Lenin said: “The accounting and control necessary for this have been simplified by capitalism to the utmost, till they have become the extraordinarily simple operations of watching, recording and issuing receipts, within the reach of anybody who can read and write and knows the first four rules of arithmetic.”

But that's not how things played out. The spontaneous order of the free market serves a function that cannot be duplicated by “anybody who can read and write and knows the first four rules of arithmetic.” For starters, one must have those tidbits of knowledge on scarcity and consumer demand only revealed through prices. Prices that only have meaning when private property is sacrosanct and people are free to trade.

Hence, I am pinning the blame for economic chaos squarely on the Bank of Canada's interference with interest rates. There are other factors, but the central bank remains my number one. Take this absurd statement from Stephen Poloz for example. Don't call it a recession, he says, “I'm not going to engage in the debate about what we actually call this because those terms are very finely determined. It's not a casual or mechanical system."

Yes it is a casual system. Economics is a causal-realist approach, not a mathematical discipline. Sound economics places individual choice at the center of the theory. There is no validity in “homo economicus” or computer models predicating a “closing of the output gap” by 2017. What the fuck is an output gap? Economics searches for cause-and-effect relationships (or “causal laws”) that explain things like prices, wages, and interest rates as actually observed in the real world. As a central banker, Poloz isn't looking for these cause-and-effect relationships. He's there to ensure Canadians remain prosperous even at the expense of capital consumption. An expense that will eventually rear its ugly head as a “major contraction.” But maybe by then Poloz will be working somewhere else. That's what Mark Carney did, let's not forget that shit. He's equally to blame as well.