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Complacency Could Cripple Recovery

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Free markets are tough. They require discipline,

As ever Heath begins his analysis with the unacknowledged assumption that left to it's own devices the market would return like a gyroscope to a stable center- failing to realize that the 'recovery' he is so excited about is just another phase in the endlessly recurring boom bust cycle that he still fondly imagines we can escape.

Without perhaps intending to Heath is simply pointing out the same thing that Minsky pointed out before him, that confidence begets confidence which itself plants the seeds of the next bust. The fantasy that the economy can somehow exist in an equilibrium clouds his thinking and leads him to believe that we can choose to freeze the cycle- but it's a process, it exists in time- and anything that exists in time changes over time- so the stable economy he dreams of cannot ever really exist.

This fantasy that in the absence of state meddling the economy would be naturally stable is just a fantasy. In fact it could be argued that the state's attempts to control the market arose precisely because the market is inherently unstable, as people sought ways to manage and control this instability.

So instead of the state's attempts to control the market being the cause of it's instability, they may in fact be a response to that instability.

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As ever Heath begins his analysis with the unacknowledged assumption that left to it's own devices the market would return like a gyroscope to a stable center- failing to realize that the 'recovery' he is so excited about is just another phase in the endlessly recurring boom bust cycle that he still fondly imagines we can escape.

Without perhaps intending to Heath is simply pointing out the same thing that Minsky pointed out before him, that confidence begets confidence which itself plants the seeds of the next bust. The fantasy that the economy can somehow exist in an equilibrium clouds his thinking and leads him to believe that we can choose to freeze the cycle- but it's a process, it exists in time- and anything that exists in time changes over time- so the stable economy he dreams of cannot ever really exist.

This fantasy that in the absence of state meddling the economy would be naturally stable is just a fantasy. In fact it could be argued that the state's attempts to control the market arose precisely because the market is inherently unstable, as people sought ways to manage and control this instability.

So instead of the state's attempts to control the market being the cause of it's instability, they may in fact be a response to that instability.

we can choose to freeze the cycle,

just stop exacerbating it with lunatic ideas like HTB.

hands off our money, government.

you do too much, and do it badly.

that's the message.

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As ever Heath begins his analysis with the unacknowledged assumption that left to it's own devices the market would return like a gyroscope to a stable center- failing to realize that the 'recovery' he is so excited about is just another phase in the endlessly recurring boom bust cycle that he still fondly imagines we can escape.

Without perhaps intending to Heath is simply pointing out the same thing that Minsky pointed out before him, that confidence begets confidence which itself plants the seeds of the next bust. The fantasy that the economy can somehow exist in an equilibrium clouds his thinking and leads him to believe that we can choose to freeze the cycle- but it's a process, it exists in time- and anything that exists in time changes over time- so the stable economy he dreams of cannot ever really exist.

This fantasy that in the absence of state meddling the economy would be naturally stable is just a fantasy. In fact it could be argued that the state's attempts to control the market arose precisely because the market is inherently unstable, as people sought ways to manage and control this instability.

So instead of the state's attempts to control the market being the cause of it's instability, they may in fact be a response to that instability.

Minsky spent the best part of his life trying to overthrow the scientifically illiterate orthodoxy that Alistair Health proclaims daily through the pages of City AM.

You want to talk about complacency?A decade ago Heath and fellow neoclassical apostles were still busy congratulating themselves for having brought about the Great Moderation, an era of perpetually rising prosperity and low inflation made possible by globalisation, light-touch regulation and financial engineering. We all know what happened next.

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Our recovery is at risk from British arrogance and delusion.

Their "recovery" is at risk of being found out to be far from a real recovery and to be just a deluded manipulation of the GDP and employment stats etc.

The purpose of the article (apart from filling in part of a sheet of newspaper) is to bring attention to the statistical recovery and to hype it up as if it was a real one and to fool people in advance of the UK's eu and local elections - which are only a week away..

Celebratory champers all round like in the photo near the top of the article - for their "feel good factor".

Edited by billybong

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Take the 1970s: the buoyant expansion in the early years of the decade under Lord Barber, the Tory Chancellor of the time, was wrongly seen as caused by the brilliance of his stewardship. It ended in a nasty bust,..

Or consider the boom of the late 1980s, under Lord Lawson, another Tory chancellor: we thought we had finally cracked what it took to generate prosperity for all but it turned out to have been an unsustainable bubble fuelled by an exploding money supply. The inevitable crisis led to a mass of home repossessions.

The there’s the 1990s and 2000s, and Gordon Brown’s promise that he had ended boom and bust, which was so spectacularly disproved during the great crisis of 2007-08.

Strange that he talks about the 90s as if there was a boom then - and as if it was during Brown's time. There was no such thing as a boom in the 90s and despite the apparent implication to the contrary Gordon Brown was in opposition then until 1997. He was, of course, Chancellor and then Prime Minister and as such responsible during the 2000s boom/bust.

Even so the policies he highlights during all those periods were wicked policies as, apart from anything else and there was plenty else, during each period they excluded young people who weren't already on the housing ladder and caused untold damage.

None of those previous periods were as wicked as the current one building a mega bubble to continue on top of a pre-existing bubble with the resulting damage to young people's prospects as well as other age groups and especially as that damage is already evident and then the future catastrophic outcomes will already be known to be likely to happen from the experience of the past "booms".

Edited by billybong

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