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As I wrote in the chapter on Economics in my book The Graysonian Ethic, there are two ways of looking at the world of economics: The big picture economists and the little picture economists. The big picture economists look at macro trends and generally have very accurate models right up until they don’t, and the little picture economists tend to look at the aggregate of individual decisions and tend to have models explaining why the very accurate models stop being accurate. Ideally, you need to have a combination of the two, because while the trends are important and if you ignore them you can miss huge opportunities, the details are also important and if you ignore them you can also miss huge risks.

The current economic situation, where monetary inflation is combined with a self-inflicted gunshot wound on the economy, reminds me of the US recession in 1893. The Sherman Silver Purchase act remonetized silver, causing inflation which led to an easy supply of credit. Unlike other recessions, this one was caused by massive protective tariffs of the McKinley tariff act, which instead of causing an artificial bubble, instead collapsed the value of healthy markets by forcing a heavy tax burden on manufacturers and farms who relied on imported parts. Compare this to the self-inflicted gunshot wound that was the worldwide COVID restrictions.

People can look at the 2000, 2003, and 2008 recessions and the increasing time between them and assume the next recession will be shallow and the recovery long and bountiful, but there’s a big problem: The huge amount of time between recessions in the 2000s and 2010s was paid for by breaking into our seed corn. Personal debt exploded, corporate debt exploded, government debt exploded, and now there isn’t much wiggle room. Economies around the world have massively increased their debt to GDP ratio so it’s becoming quite unlikely that they can just spend their way back to prosperity, and the central banks in partnership with the governments have caused inflation to kick up, which means it's not going to be as easy to just pump money into the system to make it over the next bump in the road.

Unlike 1893, everyone’s basically used up all their trump cards, and I think if the world economy is going to stay healthy, there needs to be a real recession to get rid of the cancerous malinvestment sucking productive capacity out of everyone everywhere. People and material are getting sucked up by stuff that doesn’t do anyone any good, and we need to let those ventures fail so people can make better use of them.