Reverse Economics

Reverse Economics

Our State legislators, congressmen, and the President all seem to be adopting this new economic theory, Reverse Economics. This is how it works, do the opposite of what makes sense and hope it suddenly fixes the economy and makes everyone happy.
Let’s take a close look at how this is working so far….

Housing Market
Problem – Banks wrote to many loans to people who couldn’t afford it and ended up losing money when homeowners forclosed.
Reverse economics solution – give the banks more money and make them write more loans
Why this doesn’t make sense – writing to many loans is what got them in this position in the first place. If they are forced to write more loans they just get caught up in the same cycle. Banks need to be able to turn down people who they feel won’t pay them back. I certainly wouldn’t loan money to someone I knew never pays anyone back so why should the government force banks to do so.

Stock Market
Problem – companies losing money and risk going bankrupt
Reverse economics solution – give billions of dollars to companies that weren’t smart with their money to begin with and hope that suddenly making them rich again will teach them to be responsible.
Why doesn’t this work—keeping a sinking company afloat only prolongs the inevitable. If theres no demand for the product a company is selling, keeping it open just means they are making product that will never sell and they’ll go out of business anyway. Our economy works when failing companies are allowed to fail—it’s called competition and it’s good for the consumer.

Job Market
Problem – People are loosing their jobs!
Reverse economics solution – raise taxes to increase revenue and then put the money back into the economy to booster everyone’s life.
Hello, this doesn’t work either here’s why – the economy counts on the people who are spending money. People’s job count on people spending money. Higher taxes take money out of the pockets of shoppers therefore creating less demand for product and leading then to the inevitable layoffs – which then becomes one big marry-go-round (the person who was laid off is now shopping less, affecting more people along the line, the more people laid off, the more people are going to be laid off).


Economy is a cycle – long periods of inflation always lead to deflation and downturn. We can only go so high. The slump hurts right now but once things start to re-bound we’ll be better off because of it. Downturns keep prices low and keeps companies in check. As soon as the governments stops trying to fix the economy things will start to turn around. The government is only making things worse by postponing the inevitable.