Why recessions are needed

[Mega]

I for one like recessions, in Blighty we usally get one every 10 years or so. People get pissed about them, but in fact its well worth having one. Think of it like a saftey valve, letting excessive presure escape.........

Yes, there are losers, but these people are taught a great lession about NOT living beond their means!

Sadly Labour/CLinton/Bush decied NOT to have one in 2000 ish..............So the presure built up & up.......till one day say 18 years after the last one Britian had a recession.........a Total Bastard of one built on buy now......... pay back one day over the rainbow!

GB Household debt now stands at £1.3 TRILLION!!!

Factor in A MEGA recession in the US, together with MEGA rates rises her & The fall of North Sea oil production..........Yep you see BIG problems ahead!
Mike/Liverpool

[Finster]

Re: Why recessions are needed

I for one like recessions, in Blighty we usally get one every 10 years or so. People get pissed about them, but in fact its well worth having one. Think of it like a saftey valve, letting excessive presure escape.........

Yes, there are losers, but these people are taught a great lession about NOT living beond their means!

Sadly Labour/CLinton/Bush decied NOT to have one in 2000 ish..............So the presure built up & up.......till one day say 18 years after the last one Britian had a recession.........a Total Bastard of one built on buy now......... pay back one day over the rainbow!

GB Household debt now stands at £1.3 TRILLION!!!

Factor in A MEGA recession in the US, together with MEGA rates rises her & The fall of North Sea oil production..........Yep you see BIG problems ahead!
Mike/Liverpool

Same here stateside, Mega. It seems the longer we go without one, the worse off we are. 1992-2000 was one of the longest periods ever, and the imbalances that built up were phenomenal. A stock bubble blew up so big that when it collapsed prices fell more than any time since the Great Depression. In the 1990s we kept having what they called "soft landings", but oddly nobody ever questioned what we were doing airborne to being with. Then in 2000-2002 we had a sort-of recession that the folks who declared it didn't even recognize as one until it was over. We somehow skipped the part where consumer spending was supposed to recede, and for some reason we were all supposed to be happy about that.

Now look at the mess we're in.

[Guest]

Re: Why recessions are needed

Finster -

Mess? What mess? The US economy is strong, the American consumer stands atop global commerce like a colossus (credit card in hand), and to top it all off, we are a beacon of progress to the world! ( ? )

Everything's peachy! ( glug glug.. grabs more prozac ... glug glug .. )

[Finster]

Re: Why recessions are needed

Finster -

Mess? What mess? The US economy is strong, the American consumer stands atop global commerce like a colossus (credit card in hand), and to top it all off, we are a beacon of progress to the world! ( ? )

Everything's peachy! ( glug glug.. grabs more prozac ... glug glug .. )

What if a healthy, thriving economy is like any other healthy, thriving complex system, and that cyclicality is both a need and vital sign? A healthy human being is vigorous and active for a number of hours, and then needs a restorative "recession". Animals hibernate. Even trees shed leaves in the fall to make way for renewed growth in the spring. In a healthy economic system, likewise, credit expands, then contracts. A living heart expands and contracts. Only a dead one does not.

We treat the economy as if it were dead. Or at least as if we were trying to kill it. Suppose we treated people the same way as the economy? Suppose that instead of being awake two thirds day and asleep one third day, we determined we ought to just smooth out that nasty cyclicality and make ourselves two thirds awake and one third asleep 24-7.

Imagine if Dr. Greenspan were a medical doctor. After a long and productive day, the patient begins to feel a little sleepy. His rest will renew his mind and body for a new cycle of fresh and productive life tomorrow. But Dr. Greenspan deems that the activity must continue. He orders up a shot of cocaine.

Presto! The patient is no longer sleepy. His activity level rises. Three cheers for Dr. Greenspan! What a medical maestro!

Emboldened by his fame and reputation, Dr. Greenspan now knows what is best for his patient. Every time activity begins to wane, another shot of cocaine does the trick.

Alas, after a while it doesn't seem to work quite as well. Doses must be increased to achieve the same stimulative effect. And somehow even when the patient is alert he is not quite as productive as he once was. Now awake, but glassy-eyed, later somnambulent, our patient's internal organs gradually begin to fail. The brain ceases to function. The patient lapses into a coma.

Now, because he would not tolerate normal rest and sleep, he must tolerate coma. Because he would not tolerate recession he must tolerate depression.

Or give those few last fixes that will stimulate him into deadly hyperinflationary collapse...

[unlucky]

Re: Why recessions are needed

Interesting discussion of this topic in The Economist:

http://www.economist.com/finance/dis...ory_id=9687245

They've actually been discussing it a while, there's a chapter on the benefits of recession in their "Economics" book:

http://www.amazon.com/Economics-Maki...8567652&sr=8-1

In the section entitled "America's Phony Recovery". Originally written in 2003/2004 I believe. Prescient.