For a different approach to preventing the boom-bu...

2009-11-08T16:19:06.754-05:00

For a different approach to preventing the boom-bust cycle, you might look for Mason Gaffney's brand new book, "After the Crash: Designing a Depression-Free Economy," available from the bookstore at schalkenbach.org. See also two shorter pieces of his, linked from the front page of that same site: "The Great Crash of 2008," and "How to Thaw Credit, Now and Forever."

I cannot bring myself to believe that policy maker...

2009-11-08T09:47:40.781-05:00

I cannot bring myself to believe that policy makers will ever "restrict how much money various players, ranging from hedge funds to home buyers, can borrow."

Yet, should such an idea actually find it's way into policy, we stand at the edge of the end to market instability.

I am hopeful that by "how much money various players" they also mean how many individual can borrow.

With every new opportunity to make money comes hundreds to thousands of new individuals and firms, far more than the long run will sustain. The market becomes flooded with players and the flood of production puts the latest improved chicken in every pot. Once the market demand has been satisfied, and everyone that needs the improved chicken has one, the demand crashes.

Feedback in physics recognizes three fundamental responses, over damped, under damped and critically damped. The constant oscillation of business cycles is no less of an under damped response than seen in any other system.

At some point these cycles of bust and boom have to be dampened out. At some point, the benefit from getting a dozen internet companies online asap is outweighed by the frustration of tens thousands of unemployed HTML programmers.

Comments on Policy and Economy: How the crisis could change economic theory

For a different approach to preventing the boom-bu...

I cannot bring myself to believe that policy maker...