My Understanding of Our Economy

By Daniel Miessler on July 2nd, 2008: Tagged as America | Economics

I’m no economist, and I’m not even very strong with the fundamentals (that would make me an economist, I suppose). But I am starting to pay more attention.

Out of all the explanations and models that I hear, this one laid out below encapsulates my current understanding the best.

A great quote from the piece:

Consider a different view of cause and effect. If the recession is a correction to an overly pumped economic boom, matters change. The recession, then, is not an aberration crying out for correction; it is itself the correction for the unsustainable economic bubble that preceded it. It should be welcomed in the same way we welcome a sober day after a drunken evening, or the detoxification of an addict after a period of addiction.

[ Grand Theft Society | mises.org ]

  • Digg
  • Reddit
  • StumbleUpon
  • description
  • Google
  • del.icio.us
  • TwitThis
  • Facebook
  • MySpace
  • E-mail this story to a friend!
  • Print this article!

Viewing 2 Comments

    • ^
    • v

    Disclaimer: I haven't yet read the piece you link to, so I'm responding only to the bit you quoted from it.


    That's not a bad analogy, but this isn't to say that recessions are necessary. The goal should be to avoid BOTH the overenthusiastic boom and the recession. Indeed, the analogy isn't perfect. When an addict suffers withdrawal symptoms, he or she is suffering for his or her own addiction. When the economy suffers a recession, MANY people suffer .. including those who did not partake in the boom. This is why it is so important to try to steer the economy clear of recessions (whenever possible) and (thus) to try to avoid the overenthusiastic growth spurts that can lead to recessions.

    • ^
    • v

    You cannot steer the economy. The economy is driven by the "invisible hand" of the market (Thank You Adam Smith). Any attempts to "control" the economy will lead to more booms and bubbles as we have experienced in the last 40 years because of the Federal Reserve's "attempt" to control the economy once we went off the gold standard..


    Just as the floods in the Midwest show we cannot control the flow of river, we cannot control the flow of the market. The less we attempt to manipulate the market, the less severe the booms and busts will be (with th exception of natural disasters and the like) and more even flow of growth can be expected.


    The only thing we need to do is to ensure the currency we use is backed by something tangible besides 1s and 0s


    Due to our hubris, humans have the need to control everything that affects them without taking the time to realize that sometimes the best plan is to do nothing and just be prepared.

 

Trackbacks

(Trackback URL)

close Reblog this comment
Powered by Disqus · Learn more
blog comments powered by Disqus

My Twitter Microblog

    Discovered Content


    About dmiessler.com

    This site is an avatar for my own self-assigned life purpose--an attempt to model the world in the most accurate way possible, and to do so without bias or fear of unpleasant truth. I desire to develop, articulate, and perpetually improve models of how things work, and then to use that understanding to increase happiness and reduce suffering. I seek those on similar paths and thrive on sharing an appreciation of the interesting and beautiful with others.



    Blog
    Study
    Writing
    Infosec
    Technology
    Politics

    Top Original Content


    Security & Technology

    Philosophy & Science

    Culture & Society

    Blog Archives