Unbeknownst to those trembling in fear of a crushing recession, the crushing recession they fear is the only curative for a fatally distorted system which has lost touch with reality.
Everyone looking at the inevitability of recession with alarm is forgetting the many upsides of recession, especially one that crushes all attempts to reverse it with the usual tricks. Let’s not forget the simple joys of lighter traffic, faster commutes and the relative ease of getting a table at your favorite bistro–if it survives the bust.
Graveyard levity aside, there really is no equivalent to the positive force of crushing recessions. Only recessions which defy the usual tricks of monetary easing (create trillions of new dollars) and fiscal stimulus (give away a few of those new trillions) have the power to cleanse a system clogged with dysfunction, waste, fraud, corruption and financial zombies that soak of resources while doing little more than enriching the few at the expense of the many.
The problem with free money is that there’s no mechanism to distinguish between waste and productive investment or fraud and productive utilization. All uses of free money are equally beneficial because if this free money is squandered, there’s always more to spend tomorrow. In other words, in a system in which free money is the solution to all problems, there’s no motivation to limit waste, friction or fraud because there’s always enough free money for both waste, friction and fraud and needed spending and investment.
Recessions driven by inflation and the collapse of speculative bubbles aren’t fixable with free money because free money fires up the afterburner of inflation. Once there are limits on how much free money can be created and distributed, squandering what’s left on waste, friction and fraud means there’s not enough left to fund essential services and invest in the only real-world source of income and wealth, increasing productivity–doing more with less capital, labor and resources.
Only crushing recessions introduce the discipline of having to choose between waste, friction and fraud and essential services and investments. Waste, friction and fraud aren’t simply gargantuan drains on resources; they corrupt the system by incentivizing friction (unproductive complexity and gatekeeping) and fraud (collusion, fraudulent billing, buying political favors, insider trading, etc.) and giving the recipients of friction and fraud the financial means to protect their fiefdoms with complexity thickets and political protection.
Financial systems that never experience crushing recessions can’t tell the difference between a speculative mania driven by corporate buybacks and a bull market driven by improving productivity that lifts both profits and wages. The phony charade of speculative bubbles inflated by the Federal Reserve’s spew of free money for financiers fatally distort the entire incentive structure of the financial system, which then balloons up and fatally distorts the entire economy.
Unbeknownst to those trembling in fear of a crushing recession, the crushing recession they fear is the only curative for a fatally distorted system which has lost touch with reality: yes, there is a difference between speculative bubbles and bull markets, and yes, there is a difference between an economy riddled with the cancers of waste, friction and fraud and one strengthened by incentives and corrective mechanisms that bury unproductive zombie financial entities and reward those who actually increase productivity rather than destroy it.
My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)
If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Recent Videos/Podcasts:
Charles Hugh Smith on The Great Reset Agenda (42 minutes, with Richard Bonugli)
My recent books:
Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25) Read Chapter One for free (PDF).
A Hacker’s Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).
Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).
The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)
Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free
Become a $1/month patron of my work via patreon.com.
NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
THIS ARTICLE ORIGINALLY POSTED HERE.
