Thursday, February 19, 2009

The Misdirection of Resources and the Current Recession

New York University Professor Mario Rizzo recently delivered a speech on the present crisis state of the economy, and government reaction to the crisis. The speech was presented at the Club for Growth-Heritage Foundation Conference, "Economic Recovery: Free Markets vs. Big Government," Hyatt Regency Washington on Capitol Hill, February 10, 2009.

The speech is the best summary and analysis of the current economic situation that has been written. I note that he points out that, "Low interest rates tend to favor consumer durable goods (like houses and automobiles) and capital projects because their present value is increased relative to what it would be at higher rates." Given what has gone on in the housing sector, it is important to understand, as Rizzo clearly does, that these "consumer durables" should be considered as part of the movement towards the "capital goods" sector growth during the boom period of the business cycle.

I consider Rizzo's paper must reading.

UPDATE: Here's a video copy of Rizzo's speech.

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