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China, hold my hair back: In Defense of Recession.

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Recession is a nasty word. It means sacifice and pain to many. It touches everyone, rich and poor. However, it is simply the economy`s way of screaming `last call` at the end of a good party. A recession is the economic equivalent of a hangover.

The last decade saw an unprecedented economic boom for the entire world. It was a boom built on cheap credit and a consumer driven US economy. A series of must-have consumer items paid for by mortgage equity withdrawals  placed flat screen tv’s in many homes and new cars in many driveways. The house became an ATM and China turned into world distributor of all goods and credit the equity in your house could buy. Global wealth appeared to be increasing. It was a no money down miracle!

However, nothing comes for free. There is always a price to pay. Growth was accumulated up front.  And that’s where a recession comes into play. The hangover after binging on fast food and cheap beer (it tasted good at the time, didn`t it?).

Recessions tend to bring things back to normal. It is a purge of excess. A return to normalcy.

Global policies must recognize that a recession is a nasty, but natural part of the business cycle that is exacerbated by excess. A managed recession is the best case scenario that will rationalize businesses (i.e. those which are built on cheap credit and a consumer that has no limit on spending need to be shuttered or diminished) and set the stage for future growth.

Written by currancomment

February 18, 2009 at 4:29 am

Posted in Uncategorized

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