Suffering slightly from a Christmas cold, the analogy between an economic recession and a dip in the immune system was worth noting.
At the onset of a cold most people rush to cover up the symptoms and take the over the counter cold medications and continue on as normal. Then they like to blame the last person that they came into contact with for causing their cold. Then they moan and groan through the symptoms until they finally pick up.
Same with governments really. At the first sign of a recession they rush to print money, squeeze interest rates, pump into the economy more government spending… basically infuse the economy with a bunch of drugs. They then may blame other people - foreigners, large corporations, oil prices: basically markets. Then they moan and groan about how well their policies of drugs will help the economy improve and that all will soon be well.
But as with a cold, the reason for heading into a recession is not the symptoms but the causes. How do we catch a cold? Our immune system is compromised - we partake in too much alcohol, sugar, refined foods; we do not allow our bodily systems to recover from work or exercise; we do not get enough nutrients to sustain ourselves and to protect our immune system from functioning. And yes, we may talk ourselves into a cold or illness directly or indirectly through mental stress.
An economy heads into recession because it has been drugged up in a boom through artificial low interest rates and monetary expansion; the government borrows on its good credit rating and spends money on anything that moves (or sometimes doesn't move). At some point, the crazy highs created by the central banking system and fractional reserve monies falter and people realise that the drunken state of the economy is vaguely masking a very unhealthy body economic. The effects will come regardless of whether people recognise how ill the economy has become, but a change in expectations can create a swifter alteration in the economy, just as if we realise the onset of a cold we make take some preventative measures such as getting more sleep or avoiding the sugars. As with a cold, a lot of TLC is required - which in the economy's sphere is laissez-faire. Leave it alone, give up the causes that created the cold in the first place, and just let the body recover.
What helps the body recover is a dose of good nutrients (the chicken broth, the vitamin D and C, and sleep, and of course time.) What helps the economy recover is a dose of good nutrients in the form of encouraging private investment (letting interest rates rise to encourage saving), foreign investment, low taxes (to stop further drains on the system), a reduction in government spending (a parasite on the economy), and time to allow people and the markets that they engage in to sort themselves out.
Dr Alex Moseley