A Tale of Two Recessions: One Excellent, One Tumultuous
BY PGF
2 years, 4 months ago
Source: (Italics and Bold in the original)
Events may show that there are no winners, only survivors and those who failed to adapt.
Some recessions are brief, necessary cleansings in which extremes of leverage and speculation are unwound via painful defaults, reductions of risk and bear markets.
Some are reactions to exogenous shocks such as war or pandemic. The uncertainty triggers a mass reduction of risk which recedes once the worst is known and priced in.
Far less frequently, structural recessions are lengthy, tumultuous upheavals that can set the stage for excellent long-term expansion or unraveling and collapse. In these structural recessions, 10% to 20% of the workforce loses their jobs as entire sectors are obsoleted and jobs that depend on excesses of debt and speculation go away.
In the U.S. economy of today, this would translate into a minimum of 14 million jobs vanishing, never to return in their previous form and compensation.
The old jobs don’t come back and new jobs demand different enterprises, training and skills. Unemployment remains elevated, spending is weak and productivity is low for years as enterprises and workers have to adjust to radically different conditions. If the economy and society persevere through this transition, the stage is set for the reworked economy to enjoy an era of renewed prosperity and opportunity.
If an economy and society can’t complete this transition, stagnation decays into collapse.
I’ve annotated a St. Louis Federal Reserve chart of U.S. recessions since 1970 to show the taxonomy described above.
The drive to never have any pain through natural times of pruning economic inefficiencies will cause the final and total collapse of the system. This article is a pretty good background as a way to understand the economic environment, the crises created by trying to fix problems, and the worse pain of never wanting any difficulties. Of course, we’re a little more jaded about the motivations of those claiming they are just trying to help. You can see the chart and analysis on that website.
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