“The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.” – Winston Churchill
It only takes someone a few minutes on the wrong side of a trade to realize just how tenuous a poorly researched, or implemented strategy can be. The market can be a brutal thing- it doesn’t take prisoners, it doesn’t care about morality. Therefore, it is no wonder that we have entire fields of economics dedicated to muting the swings in the business cycle or just flat-out trying to do away with it altogether.
Typically we see recessionary events about once every 7-9 years, and despite this general certainty we have never been able to entirely mitigate the negative consequences as a species. It is quite likely, in fact, that the peaks and troughs of the business cycles are, at least in part, due to physical phenomena exerting themselves through the economy. If that is the case, then we are no more likely to be able to mitigate the business cycle than an ant can support someone’s boot heel.
Recessions lead to destruction of wealth, loss of income and rapid shifts in the underlying fabric of society. Indeed, it’s likely that in many cases, we’ve made recessionary events worse by getting involved and mobilizing government without understanding the underlying causes of the recession. Even economists can’t agree on which school is correct, and even if they agree on the general theory, like Keynesian or Monetarist Economics, they might face the contention of whether something is a supply or a demand shock .
So why do we try to meddle to offset statistically certain events when notable central bankers have declared the business cycle to be invictus?
It’s the classic tug of war between trying to do what’s right, and trying to do what is prudent. Ultimately, understanding the truth by examining evidence and cutting through the layers of superfluous information in order to get to the real cause and effect is the best weapon that humanity can wield in the face of adversity.
Fight the trend at your peril. You’re better off identifying reality and acting accordingly.