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107 sats \ 1 reply \ @Undisciplined 22 Jun \ on: Are regular economic downturns/recessions "normal and inevitable"? econ
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.
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.
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