Paul Krugman may not be able to see the Forest for the Trees. He does not know What to call this Era since WWII. It is simple: We are in the Age of the Central Banks. They were all around before this Period, but no one paid them much attention; up to and until We began to wonder How one financed World Wars. Ad hoc activities were generated during the Wars themselves, but the techniques were defined and refined after the Shooting stopped. This might be the problem of central banks: their need to defend their own existence by creation of a modus operandi. They continually invade new areas of economic activity, and corrupt the found behavior with the techniques designed in War; things ranging as diverse as Corporate raider technique to debt creation for Welfare Costs. Their mantra has become ‘Debt is Good’, and We have way too much Debt for our own Good; creating a brand new industry which the economy cannot pay for in the traditional context. One cannot precisely define Why the institutionalization of Production Costs as an industry is bad, but I suspect it very much constitutes a suicidal self-defeat mechanism.
I am not the only individual worried about the above-mentioned trend. Here is the basic Problem. Debt is ever-increasing in magnitude, along with an absorption of national and World GDP percentage ratios. Central banks advocate reduced Interest rates at periods when more and more funds are devoted to Debt creation and Interest resolution. An increasing percentage of GDP is being regulated, and in a manner which suppresses adequate Return on the capital involved. It upsets the basic Production cycle matrix, and presents a risk-aversion matrix of lowered Return safe investment–nullifying the risk performance cycle. Risk management shows suppression at the enterprise level, while Taxpayers are left with long-term expensive Mortgaging with delusional Start-Up payments. We are changing the basic nature of the economy without effective capitalization of that Change, and it will eventually cost Us far more than We imagine.
Read this article on the determination of recessionary cycles. Study the graphs provided herein, and ask if Recessions are not of far greater duration than expressed by the formal definitions of the cycles. Effective growth ratios and labor integration extend far beyond the stated recessionary parameters, and often do not even get back to previous periods before the next recessionary period. This could be because of economic alteration to new business practice; yet, involved review does not suggest that the transitional losses result from technical revision of the Production cycle. It is my Thought that Recessions should be expanded to two following Profitable Quarters, which is the exact period necessary for business to return to full employment roles–after they have regenerated their capital reserves. This subtraction from the boom cycles, and addition to the recessionary cycles, would reflect far better the exact position of economic performance. lgl