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.
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 ).
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.
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"?
https://www.youtube.com/watch?v=II4Ct2n5FiE
The pertinent part is at ~2 minutes.
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?
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.
Interesting belief. Things like the Long Depression challenge it, though.