Most economic commentators consider a decline in economic statistics, such as gross domestic product (GDP), as indicative of a decline in the health of the economy. According to most experts, this decline in the GDP—which is called a recession—as a rule, arises because of an overall decline in the aggregate demand for goods and services. This is seen predominantly as a decline in the private sector’s buying of goods and services.
Consequently, it is recommended that the central bank should step in and strengthen the private sector’s demand. This, it is held, will pull the economy out of the slump. The means recommended by experts are the lowering of interest rates by increasing the growth rate of money supply.
The problem—central to economics—is that goods are not readily available. These goods have to be produced by transforming various things in nature into goods, either capital goods (to make other goods) or consumer goods. The transformation of things undergoes various stages and takes time. In an economy, which operates in the framework of the division of labor, some individuals are employed in the extraction of various raw materials such as coal and iron. Some other individuals are employed in the conversion of raw materials into various tools and machinery. Still some other individuals are employed in the transformation—using tools and machinery—of various things into consumer goods.
A recession should not be defined as two consecutive quarters of negative GDP growth, but as the liquidation of bubble activities that emerged on the back of the previous easy-money policies of the central bank. The recessionary process is set in motion once the central bank reverses its easy stance, however, this inflationary policy cannot be continued forever or it risks undermining the entire monetary economy. What matters for true economic strength is not strong economic data but freedom from the central bank and government policies that tamper with markets and money.
Yes, this is an important little detail on the movements in the economy: it is the amount of savings and production that makes the economy move in any direction , not state spending and central bank interference in the economy by fussing with the interest rates and quantity of money. Whenever the central bank creates something out of nothing and distributes the new air money to the cronies closest to the state and central bank, they get the something for nothing and the rest of us get BOHICA. So, why don’t we try to get the economists working for the government to measure the growth and decline of the economy a different way, in terms of production not consumption. Oh, forgot, this is exactly what the state wants to do to fool the sheeple!