If you watch the financial news, you are aware that a whole bunch of economists, many of whom have a Pd.D. in that academic discipline, have determined that not only has the recession hit bottom, but that the general economy is in a recovery mode. Without going into the details of this prognostication on their part, the problem is that they do not understand the difference between Wall Street and Main Street.

If you look solely at Wall Street, a rarified atmosphere composed of a few large players if there ever was one, there is reason to be optimistic. The Dow is up over 25% since March of this year. With the realtively lower unemployment figures that came out recently, Wall Street celebrated and went up even more. The major banks are back to their old business models and using them to make a lot of money trading stocks, bonds, derivatives, and so forth. So if you got into the market early this year, you are likely ahead of the game right now. Good for you, but you know full well that is more dumb luck than anything else.

Despite this, we also know that Main Street is bigger than Wall Street and a lot more people live and work on it than on Wall Street. So what does Main Street tell us about the state of the economy? First go here, http://latimesblogs.latimes.com/money_co/2009/08/although-everyone-knows-that-the-us-is-borrowing-and-spending-at-an-unprecedented-pace-the-numbers-are-all-the-more-stun.html and read about our national deficit. What you’ll get is the Monthly Treasury Statement of Receipts and Outlays of the United States Government For Fiscal Year 2009 Through July 31, 2009, and Other Periods. It tells you that (1) the federal budget deficit, in the first 10 months of the government’s fiscal year, increased 227% from the same time in the previous year to $1.27 trillion (that’s $127,000,000,000,000). Further, the government spent $3.01 trillion (yes, that’s trillion with a “T”) to-date this fiscal year, or an increase of $524 billion.

Now here is the really crippling part. Because of the effects of the recession, tax and other income sources have decreased by $1.74 trillion or 17% from the same period in the last fiscal year. This decrease is in the areas of personal income tax, corporate income tax, and income from the investments the federal government has.

Now, clearly, the government has to spend money. We want a military that is ready and prepared to defend us, we want interstate freeways to get us from place A to place B. We want an intelligence apparatus to protect us from the crazies there are in the world.

But where is it going to stop? Main Street pays for most of this, not Wall Street. Main Street knows that if $10 comes in, $20 can’t go out (at least not for very long, anyway). We’ve all been in the position when we had to borrow money to survive. But for some stupid reason, those who lent us the money want us to pay it back. That’s how Main Street works. Cannot Washington fathom that simplicity?

Those economists tell us that we can monitize this debt, and that we owe it to ourselves, so debt this eneffably huge is really not a problem. Yet we on Main Street know this is not true. To servive this recession most of us have dipped into our savings, retirement, or investments. Yes, that was our own money, so we owe it to ourselves. Yet, unless we have enough of a surplus to pay it back, we cannot. The key here is surplus. The federal government has no surplus! It has a $trillion-plus debt (and it grows daily!)

The government monitizes debt by printing money to use to pay for it. Main Street cannot print its own money (legally, anyway). When the government merely prints money to pay its debt, it debases its currency – in, other words, makes it worth less. That also drives up interest rates since lenders want more vigorish for the money they loan if, when it is paid back, it is worth less.

Now, in light of all this debt, how are we even to consider a massive health care system that, in essence, is socialized medicine? We cannot pay the debts we have now, how can we add another $1 trillion to $2 trillion to it over the next 10-15 years? We all know Social Security is broke. We all know that, given the drop in the US birthrate over the last 25-years, there are not enough workers in the system to provide the tax income to support even social security. much less socialized medicine.

So, is the recession over? If the economists say it is, then it must be. But look at the seeds we ourselves have planted for the next one!