No more small booms and bust's!
And yet our economic policy makers have often aimed for maximum stability,
even for eradicating the business cycle. “No more boom and bust,” as voiced by
the U.K. Labor leader Gordon Brown, was the policy pursued by Alan Greenspan in
order to “smooth” things out, thus micromanaging us into the current chaos. Mr.
Greenspan kept trying to iron out economic fluctuations by injecting cheap money
into the system, which eventually led to monstrous hidden leverage and
real-estate bubbles. On this front there is now at least a glimmer of hope, in
the U.K. rather than the U.S., alas: Mervyn King, governor of the Bank of
England, has advocated the idea that central banks should intervene only when an
economy is truly sick and should otherwise defer action.
Promoting antifragility doesn’t mean that government institutions should
avoid intervention altogether. In fact, a key problem with overzealous
intervention is that, by depleting resources, it often results in a failure to
intervene in more urgent situations, like natural disasters. So in complex
systems, we should limit government (and other) interventions to important
matters: The state should be there for emergency-room surgery, not nanny-style
maintenance and overmedication of the patient—and it should get better at the
former.
From WSJ Learning to Love Volatility
http://professional.wsj.com/article/SB10001424127887324735104578120953311383448.html?mg=reno64-wsj
PS The idea to regulate, to suppress volatility, to combat the business cycle and to bailout the losers is turning the world into a fragile system prone to a big fall. If we don’t allow for small failures one day we will get a big one. All of this is done in order to win the next election......I think democracy is not serving the people anymore.
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