My Understanding of Our Economy

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

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    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.

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    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.

 

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