People usually think recessions are bad. Are they in fact necessary? Akin to naturally occurring small forest fires…those are good otherwise there could be a mega fire.
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Not exactly.
It’s just that we haven’t figured out a better way to do it than to have regular smallish recessions.
We used to have very large recessions, somewhat irregularly (often more frequently) before the advent of, basically, 1930s modern (aka keynesian) macroeconomics and the use of taxes and spending, and changing interest rates, for the purpose of managing the economy.
Since ww2 the federal reserve has intentionally caused most of our recessions, most of which have been historically pretty small, and it’s been considered a success compared to the alternatives.
The forest fire metaphor isn’t the worst but ultimately recessions are going to kill good businesses just as much if not more than the bad ones. It’s just, again, we don’t have a method to avoid them and have a capitalist market economy with regular growth and free choice with your money.
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