Wednesday, March 3, 2010

Quick Link: Bring on the Depression

One of my favorite authors (Bill Bonner) has a great column over at The Daily Reckoning.

His missive today, entitled Getting On With The Depression to Make Way For Growth, talks about the need to embrace business cycles as a way to clear the air:
Do we want a depression? Well…yes…bring it on! But not because we enjoy seeing people lose their houses and stand in bread lines. It’s only because we know that a lot of mistakes were made during the bubble years – thanks largely to the government’s mishandling of the economy. While real, underlying wealth only grew at maybe 2% per year, people spent an extra 5% to 10%. This spending gap grew during the bubble years, effectively consuming wealth that had not been earned yet…and leading to so many capital investment mistakes that there is no way to avoid a bit of backtracking – which we recognize as a depression.
Here at The Daily Reckoning, we love depression like we love mid-winter. It clears the air…and prepares the earth for spring.

Given the way elections and politics rewards short-term solutions to big problems (regardless of long-term implications), you won't hear any candidates talking about the need to let the cycle run its course. They will all fight, tooth and nail, to re-inflate some new bubble (health care spending? war spending? green energy!?) using borrowed money to show apparant progress in time to get re-elected. Bank on it.

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