Do recessions do any good ?
An economic boom based on relentless credit expansion create mal-investments. A recession is a natural mechanism of the free market to wipe out these mal-investments/over-investments. But it is very unpopular amongst politicians to have to deal with a recession, especially when it is their turn to sit on the throne. So John Maynard Keynes came with a political solution to what is an essentially economic problem - goose up money supply and increase goverment spending to compensate for the lack of spending from business/consumers. What this lopsided thinking amongst the so called economists have caused is to never let the recession run its natural course. So the work that a recession was supposed to do gets postponed for a later date. The imbalance continues to build up and it all has to blow up one day in the form of a depression or hyperinflationary end game for the currency. Given the inclination of current crop of politicians and central bankers towards inflating, I expect that latter to happen rather than the former.
A hang over is to be expected after a long night of partying and drinking binge. Hang overs are never pleasant to deal with but best thing to do is to deal with it and get it over with. The cure suggested by Keynesian economics is sort of like an alcoholic going on a non-stop drinking binge to avoid having to deal with a hang-over. Consequences of such irresponsible actions are invariably devastating. Cure is obviously worse than the disease.
If you have read the book "Collapse" by Jared Diamond, he talks about how well intentioned efforts to prevent natural forest fires in Montana have caused fuel build up, eventually causing a much larger conflagration that ultimately guts millions of acres of forest. Free market and nature have many parallels.
Current interventionist tilt among economists have consistenly stopped market from doing what it really wants to do. Market will one day come back with vengeance, and it will not be a pretty site.
"The force of a correction is equal and opposite to the deception and delusion that preceded it." - Bill Bonner of the Daily Reckoning
A hang over is to be expected after a long night of partying and drinking binge. Hang overs are never pleasant to deal with but best thing to do is to deal with it and get it over with. The cure suggested by Keynesian economics is sort of like an alcoholic going on a non-stop drinking binge to avoid having to deal with a hang-over. Consequences of such irresponsible actions are invariably devastating. Cure is obviously worse than the disease.
If you have read the book "Collapse" by Jared Diamond, he talks about how well intentioned efforts to prevent natural forest fires in Montana have caused fuel build up, eventually causing a much larger conflagration that ultimately guts millions of acres of forest. Free market and nature have many parallels.
Current interventionist tilt among economists have consistenly stopped market from doing what it really wants to do. Market will one day come back with vengeance, and it will not be a pretty site.
"The force of a correction is equal and opposite to the deception and delusion that preceded it." - Bill Bonner of the Daily Reckoning
posted by Oil Shock at 12:21 AM
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