Commodties: Recessions are Healthy

Recession wouldn't hurt commodities that much if governments didn't interfere in free market

Most Americans and people around the world need to get a better grasp of basic economics, as the ongoing boom/bust cycle which has lasted for decades is in motion again.

Much of this is happen because of the government attempting to "save" people from the pain of these times of adjustments and make it worse by their interference. This same old story is happening again in this period of time, and it always prolongs the pain and suffering, rather than help it.

Recessions can be likened to a human body that doesn't receive much nutritional input at all, and the body reacts by failing in some way that is painful. The body is speaking to us that there is excess somewhere, and we're doing something wrong.

To pour on more excess in order to temporarily take away the pain only prolongs the suffering. Yet that's what the government does when politicians try to buy votes by continually throwing money at problems.

Recessions are an event which tells the economy there are excesses going on, and that we need to change what we're feeding it if we want to retain a healthy economy.

In other words, a lot of people, businesses and banks have made mistakes when things were going good, and as a result a recession has occurred. Now that it's a reality, consumers and businesspeople need to make the types of adjustments that will make the economic body healthy again.

Things like building up their savings while cutting back on spending. Businesses will respond by cutting prices in order to spur spending; that makes things affordable for people buying not using debt (credit cards or home refinancing).

When things are forced to be liquidated, money is set free from poor investment decisions and put to work in more productive activities. Work production increases because people are concerned about losing their jobs. Businesses streamline operations and costs, and work hard to retain and grow their customer base by improving their products and services. If they don't, the company would go out of business, along with their jobs.

Government interference is an attempt to create an artificial economic surge, which ends up causing more damage than good, as the problems which caused the recession in the first place aren't dealt with and will extend the recession. This is what happened in the Great Depression in the U.S., which would have lasted only a couple years if the economy hadn't been tampered with.

In our current economic crisis, we are experiencing an unprecedented interference by governments around the world, and it looks like many more are ready to join the bandwagon. It's bizarre in that bad debt has been the main cause of the problem, and now more bad debt is being thrown at it.

What inevitably will happen is more money will be printed to pay off that debt, and inflation will spiral out of control. How long will it take to pay off the trillions being printed out of thin air? Nobody knows. The amount being put into the global marketplace is unprecedented.

That and the illusion things are getting better by businesses and consumers causes the same underlying problems to go on uncorrected.

So things will continue to go on in this cycle history repeats itself over and over again because the problems which caused the economic disease in the first place are doomed to happen again and again.

All of this happens because the government is attempting to keep people from experiencing pain. But like doctors will tell you: pain is necessary. If we don't have pain, we wouldn't know something was wrong with a particular part of our body.

Think of individuals who have bodies that don't feel pain, and when they're children they break their bones and injure themselves in extremely unhealthy ways because the body doens't send a signal of pain to communicate something excessive is going on.

That's what happens every time the government interferes and gives the economy the pain-free drug of more money. It keeps the pain from being felt or lessoned so people and businesses can keep on going without having to adjust their behavior.

We're doomed to see this type of economic response happen again and again until we learn and decide not to allow this to happen.

As for commodities, they'll participate in the decline in response to the misguided efforts of government interference.