Originally Posted by u-Bob

*) Look, people aren't psychic so they can't predict he future. The same goes for entrepreneurs.

An entrepreneur who is in the widget selling business can't predict with a 100% certainty and accuracy how much widgets he'll be able to sell next week or next month or next year...

If he doesn't have enough widgets in store, he won't be able to make as much money as he would have been if he had enough in store.

If he has too many widgets in store, he'll have a surplus that he wasted money on and that is now just sitting there gathering dust.

Entrepreneurial error is just a fact of life. It is possible that an employer hires new people and later finds out that the extra capacity isn't needed and needs to fire people.

*) Customer preferences change. Widget X, that used to be popular 2 years ago, is almost impossible to sell these days. People used to buy horse carts, these days they buy cars...

*) People are creative and come up with new ways to solve problems. New production methods and processes get developed and people are able to produce more widgets using less resources or using other resources.

*) Time. Different widgets take different amounts of time to produce. When a certain type of car becomes popular, it is not possible for the manufacturer to instantly produce more cars. Those things take time. Especially if for example a new factory has to be built first to expand capacity.

The market constantly changes. The market is organic. And yes, mistakes happen. Unhindered recessions are the market process which corrects these mistakes. When you start building 10 new factories because you expect a huge rise in demand of the widget that you produce and your 'guess' turns out to be wrong then you'll have to sell those wasted resources. Liquidation is necessary to correct your mistake.

The real problems start when governments start intervening. When governments start using tax payer money (money they took from people who produced something other people wanted and paid for) to bail out or subsidize failing businesses. When governments start using tax payer money to buy up excess widgets that would otherwise never have been produced because there was no demand for them. When government prevent employers from firing people they can no longer afford to employ. When governments start forcing people to sell goods below market prices (resulting in a lack of supply) or above market prices (resulting in an increase of unnecessary supply). When governments prevent employers from hiring people for a wage that employees agree to and allows employers to make a profit. ....

So, small adjustments happen all the time in a free market. It's government intervention that turns small adjustments into major depressions.

It's the wartime measures and forced cartelization that caused the 1920 depression. It's the easy money policies of the mid 1920s that caused the 1929 depression. It's the New Deal and related measures that made the 1929 depression 'Great'. It's the inflationary policies of the Republican party in 1890 that caused the panic and the resulting 2 year crisis and 6 year depression. The crisis of 1873 was also a result of credit expansion. The schemes to pay the rising cost of the civil war initiated it. Jay Cook's (who had a government granted monopoly on underwriting the US gov bonds) unsustainable phantom growth eventually burst and that was 'the first domino'. btw: France was one of the few countries that escaped the crisis and the depression because it hadn't taken part in the credit expansion. etc

So yes there's a pattern BEFORE intervention: government intervention.

Originally Posted by u-Bob

As I've shown, intervention didn't stop the Great Depression. Things only got better when the amount of intervention decreased. Those 50+ years of economic growth aren't "pure real growth". We have had tons of different kinds of intervention that all lead up to the situation we are facing right now. For the most part of those 50+ years, government intervention has been causing bubbles and sustaining them to a point that what once would have been a small period of adjustment will now turn into a major depression the kind the world has never seen before.

Government advisors have already gone all Zimbabwe style and started contemplating the coinage of trillion-dollar coins. if that isn't a huge red flag, i don't know what is.