Are regular economic downturns/recessions "normal and inevitable"? \ stacker news ~econ

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Are regular economic downturns/recessions "normal and inevitable"?x.com/TheStalwart/status/1936644577483506120

614 sats \ 8 comments \ @Scoresby 22 Jun econ

Joe Weisenthal posted this thread on X:

Public economic discourse is way too accepting of the premise that recessions are normal and inevitable from time to time imo.

The fact that the past is a story of semi-regular recessions doesn't imply that the future has to be. IMO.

Exogenous shocks (natural disasters etc.) that impose real economic loss will be here forever. But the idea that we have to have a "business cycle" where from time to time millions of people lose their jobs? Not obviously necessary to me.

If you have a strong view that the economy needs to purge itself of waste or unproductive investment or whatever, isn't that what market competition is all about?

Feels like bitcoiners have contradictory views about this.

it is very common for people to talk about price drops "washing out the leverage." We have to go through the pain so we can go higher kind of attitude...
average bitcoiner seems likely to take the stance that "regular" recessions are actually caused by central bankers trying to manage economics rather than allowing things to play out organically

However, it is odd how recessions do kinda happen regularly.

Here's a (bad) chart showing the recessions/depressions/panics in the US since 1800:

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149 sats \ 4 replies \ @SimpleStacker 22 Jun

I think there's some sense in which cycles are inevitable. We're always gonna have periods of "overshooting", both to the upside and to the downside in terms of credit issuance, because it's really hard to know when the time to pull back is. I'm not sure extremely large cycles are necessary, and I guess that depends on how fast the feedback mechanisms in the market operate. It's possible that cycles are being exacerbated by investors' expectations to be bailed out by the government when things go wrong.

47 sats \ 3 replies \ @Undisciplined 22 Jun

I largely share that view, but 1) Is there reason for it to be a semi-regular cycle? and 2) How small would the amplitude have to be for us to say there are not business cycles?

59 sats \ 2 replies \ @SimpleStacker 22 Jun

Dang it I knew I should've paid more attention in my macro classes

30 sats \ 1 reply \ @Undisciplined 22 Jun

You were channeling some sort of mishmash of Real Business Cycle Theory and Austrian Business Cycle Theory.

59 sats \ 0 replies \ @SimpleStacker 22h

Great, I somehow managed to step into two ponds that I have very little knowledge of either haha

107 sats \ 1 reply \ @Undisciplined 22 Jun

I see those two points as separate.

Business cycles are patterns in the economy as a whole. The reason Austrians are skeptical that they would occur naturally is that there's no reason for every sector's economic activity to be correlated, other than through credit issuance.

Individual sectors will go through periods of misvaluation. That's the price discovery process and in that process some speculators will get wiped out.

42 sats \ 0 replies \ @Scoresby OP 22 Jun

there's no reason for every sector's economic activity to be correlated, other than through credit issuance.

This is what gets me. "The economy" is just a lot of relationships between the people who make it up. Any complex system can produce weird phenomena. Are regular recessions like traffic? No one wants to slow down, but the road's sum total of one car needing to slow down a little is all the cars a couple miles up the road coming to a stop.

So perhaps recessions are the same. One small sector "washing out" speculators tends to result in economic traffic jams for rest of the economy, ie recessions.

Central banking papers this over most of the time, but in so doing creates much higher amplitude when recessions do occur. Okay, I can believe this. But it makes sense to me that an economy without a lender of last resort would probably have the same pattern, only possibly with less amplitude.

0 sats \ 0 replies \ @nitter 22 Jun bot

https://xcancel.com/TheStalwart/status/1936644577483506120