What an excellent argument!

From Dan Roberts at The G.

Essentially, a quick economic recovery would be a bad thing because it would reduce the pressure for a fundamental change to the system.

To which hte logical response is, if we have a quick recovery then we don\’t need a fundamental change to the system. What we had was a collapse of a shadow banking system and a nasty little recession. Both have happened in the past, both will almost certainly happen again.

Losses look like being around 3 or 4 % of GDP plus two years of trend growth….another 3 or 4 % say.

Compare and contrast this loss (which might occur what, once every 20 to 50 years?) with the loss of 0.5% or 1% of trend growth per annum which we\’d have (at least I think we\’d have) from the greater involvement of the bureaucrats and the politicians in the allocation of capital across the economy.

Better to have the booms and the busts than not to have the cumulative growth perhaps?

3 thoughts on “What an excellent argument!”

  1. Depends what change is proposed. If (please God) it were accepted that incompetent regulators and excessive bureaucracy were a the problem, and the change was to get rid of them (or at least some of them) that would be good. I fear that the bureaucrats will be campaigning for more power though.

  2. Or the third option: Market based hard currency and the elimination of fractional reserve banking (and hence central bank inflation) which caused every single business cycle so far.

  3. PC has a point here.

    The central banks pushed rates down to silly levels. Now they have not really being punished for it. So, they will do it again.

    The commercial banks will play ball with them because they got bailed out this time and will probably get bailed out next time.

    The collapse of the “shadow banking” system was insignificant compare to the collapse of the normal banking system.

    This short bust has ensured a bigger bust next time.

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