[nie100sowny]

> A generation of young people whose education was blighted by COVID lockdowns, will face a closed labour market.

But shortly after, when all inefficient companies bankrupt, they'll wake up in the booming economy, finding places in perspective businesses.

Crisis is good for the economy in the long term. I only worry that governments won't allow young trees to grow after the forest's fire.

[A4ET8a8uTh0]

<< But shortly after, when all inefficient companies bankrupt,

Eh. It sounds great in theory, but in practice ( including in US, where all the more recent crises shown ) inefficient companies get saved if they are sufficiently connected or 'important' enough to the system writ large.

I am not defending the practice, but I want to point to obvious flaw in the analysis since it diverges from reality somewhat ( I just noticed the inclusion of government involvement ).

[CSMastermind]

The government bails out comparatively few businesses.

While many, myself included, dislike the practice, I don't think it happens on a large enough scale to make a significant impact on the economy at large.

[endtime]

I don't really feel like I know much about this, so someone may point out an obvious way in which I'm wrong, but:

How do you measure the effects of the moral hazard created by the post-housing crisis bailouts circa 2008? Are major financial institutions incentivized to take outsized risks if they're too big to fail? How can we be sure that doesn't "make a significant impact on the economy at large"?

[mistrial9]

the War economies are related to this phenomenon of massive, inefficient companies getting new contracts and new cash; similar to Old World central contract awards connected to long-term govt cash flows, I believe..

[Balgair]

Whenever I see takes on the long term status, I'm reminded of the casino scene in The Big Short. Though it may be good in the long term, the short term can be pretty grim for a lot of people.

https://www.youtube.com/watch?v=II4Ct2n5FiE

The pertinent part is at ~2 minutes.

[mistrial9]

> Crisis is good for the economy in the long term.

there is some name for this kind of dismissive optimism, but I do not know it.. suggestions?

I hear this kind of thing from the Cato Institute Human Progress people, who have trillions in paper wealth and the Oil and Gas economy to defend. What could go wrong?

[munificent]

A forest fire might be good for the forest as a whole, but that's a cold consolation to any particular tree or rabbit who ends up turned to cinder.

[nie100sowny]

A better analogy would be a strong wind collapsing big and old trees :)

[0xdde]

Internalized propaganda?

[desindol]

Crisis is never good look at the correlation between unemployment and excess mortality rates…

[nie100sowny]

I think you refer to the long unemployment.

Crisis time needs to be shortened then. Banks should raise rates firmly, reaching levels higher than inflation. Big companies should not be artificially saved from collapsing, and regulations simplified. The unemployment period will be then short.

[FormerBandmate]

When big companies collapse people take huge losses, lose the trust in the economy necessary for things to grow, and the economy is hurt for a long time. The bankruptcy of Lehman Brothers almost destroyed the entire financial system, slow-motion collapses like GE and Sears that take decades are vastly preferable

[landemva]

I agree with much of this. If we got the Fed out of the business of propping things up, the downturn would be quick and underperforming assets would change hands and quickly be productively redeployed. Instead, Fed in partnership with government will prop this up and protect the incumbents/existing winners.

[dragonwriter]

> If we got the Fed out of the business of propping things up, the downturn would be quick and underperforming assets would change hands and quickly be productively redeployed

Interesting belief. Things like the Long Depression challenge it, though.

[reasonabl_human]

Where do you folks go to learn on these macroeconomic topics?