Let the Economy Change

Words like 'decline' and 'collapse' are being tossed around with reference to the economy as if the economy were a static entity. Actually, of course, economies are very dynamic - with a continual stream of emerging and declining enterprises and industries. When the economy in the aggregate is growing, the emerging are growing faster than the declining are shrinking. When the declining are shrinking faster than the emerging are growing, the economy in the aggregate is shrinking, as is the case today.

Once upon a time there was a theory that if the declining enterprises were liquidated quickly, it would offer room for the emerging enterprises to grow. Imagine if you will, a forest fire burning out the dead wood.

Nowadays, the declining enterprises are given bailouts, and the forest fire of Depression isn't allowed to burn out the dead wood. If our analogy is accurate, this makes for bad forest management of the sort that led to the great Yellowstone Fire of 1988.

If current government efforts to stymie the Depression are successful, they will only put off a future, greater depression. The economy must change sooner or later to accommodate reality.

We do not know where economic developments will take society, but we opine that the rate of change is too slow. Bad operations like General Motors and AIG must be put down to allow the economy to readjust to the new realities. and the sooner the better.