Not exactly. Forest fires are occasionally desirable so long as they do not grow out of control. It is the way that deadwood is absorbed and the land is primed for regrowth and renewal. Similarly, periodic and inevitable economic excesses in all its forms must be allowed to proceed to their eventual conclusion. In that way, the excesses are absorbed and the prospects for healthy growth are renewed. A straight line is unnatural and, therefore, undesirable. The loose money policy of the last several years should be a cautionary tale. However, crazy extremes are as unhealthy as uncontrollable forest fires that threat lives and livelihood. The idea is one of balance. When the Fed unnecessarily tried to put out every small, and arguably necessary, forest fire over the last several years, and Bush gave unnecessary tax cuts to the rich rather than pay for his wars or at least reduce the national debt, the scenario was being primed for a dangerous imbalance. And here we are.
do you prefer boom-bust cycles?
- Thread starter blackjack007
- Start date
I agree that this is the reason people are afraid of the boom-bust cycle. Fear. Are emotions and fear of the unknown the only reason people don't like boom-bust cycles? Logically, I can see no other reason.
Timing becomes critical with violent booms and busts. I am tired of hearing people brag about being on the correct side of direction. Timing is equally as important as being on the right side.
OK, here's an example....
When Technology allows "1 man plus technology" to produce the same as "10 men without the technology". Sure, the "1 man" gets more pay and gets to increase his standard of living..... but what happens to the 9 displaced workers? Do they get other jobs with equal pay? Lesser pay? What happens when not all of them can get a job of any kind? How much do they get to consume if they have lesser pay or no pay?
most people prefer a steady economic ride over the recent roller coasters because they don't have the discipline to save during the good times nor the savvy and vision to exploit the boom.
times are bleak now for many people, but there are plenty of people who are doing very well. after all, when people lose money it means someone else made money. boom-bust cycles are transfers of wealth from the naive to the savvy.
How does that work?
When the stock market goes down, who makes all the money the losers lost? (Sure, some is made by the shorts.. a small percentage of what was lost by others.)
When RE values plunge, who makes all the money homeowners lost in equity?
You are assuming finite demand for exports which is not the case. Take this example:
Year 1 - total population of USA (say 300 million) produces 300 million widgets.
***new technology is invented***
Year 2 - total population of USA (say 300 million) now produces 600 million widgets.
Assuming sufficient demand, has GDP gone up?
Thats the whole point, economies must evolve. In the agrarian society it took dozens of people to run small farms. Did the 90% of displaced workers just sit around after technology made this process much easier? No, they moved on and the economy evolved. The fact is that workers displaced by technology go on to innovate and create new fields of work. Thus GDP is pop+productivity
No, it's not.
When looking at one narrow view place, it's productivity can increase.... at the expense of elsewhere.
We're in the middle of a classic example right now. It will become more clear to you, hopefully, as it unfolds.