I recently wrote a blog that described an economic depression as something similar to a whirlpool. After I finished the article I realized that I could apply a similar analogy to an economic recession. In contrast to a whirlpool, the economy during a recession could be seen as a ship experiencing rough seas. If the economy reaches the climax of a recession, known as stagflation, then the seas are very rough and the ship (the economy) is in danger of capsizing.
Here is what is significant about these analogies: If the economy does not capsize during the recession there is hope that eventually the rough sea will subside. If intervention continues it will cause another storm to form on the horizon. However if the economy is on the verge of a depression one false move will generate the whirlpool which will sink the economy into unknown depths with very little hope to resist.
If intervention continues once the whirlpool is activated the currents will just intensify. The only hope is for the intervention to stop.
What is the solution? The correct policy is non-intervention. Then the equilibrium forces that allow resources to become freed up will disrupt the vortex throughout its structure, dissipating the energy, lessening the swirl velocity, causing it to break into smaller eddies, and making the economy safe for entrepreneurs to re-enter, to diagnose, and to set their sails and forge a new direction.
What bit of economic wisdom have we gleaned?
A). Intervention causes the economic storms and it can also create a pernicious whirlpool. To avoid economic storms intervention should stop.
B). With regards an economic depression, the only way to stop its destructive forces is to stop intervention.
C. The political cesspool (politicians and their bootlicking economic advisors) has to be drained and rid of its stagnant and disease-infested economic fallacies.
