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There is nothing catastrophic about a recession

The central banks kept interest rate too low and printed too much money during the past decade.

This has led to high inflation. The war in Ukraine, together with the pandemic, made the situation worse.

The central banks have now increased interest rate sharply. They wanted to fight inflation.

This is expected to cause an economic recession in 2023. The media, and the government, made it appear to be a big problem.

What is a recession? It is an economic decline. Maybe, the economic will drop by 5% or worse by 10%.

So what?

If it dropped by 10%, it meant that the economic growth for the past 5 years have been wiped out, i.e. assuming that the economy grew by 2% a year. What is so bad about 2018? We just go back in time by 5 years, maybe less.

The problem with an economic recession is that 10% of the people, or perhaps 20%, will be hit badly. They will lose their jobs and be depressed. Even those who remained employed will be scared.

People who lose their income may face great financial distress. They may go hungry or be chased out of their home.

This problem is our economic system. We need a new economic system.

I suggest that people who lose their jobs can get some financing from the state, e.g. by premature withdrawing from their retirement savings, or have access to a subsistence loan from the state, it will not be so bad.

Another approach is to pass a law to reduce the working hours by 10%, so that everyone remains employed, maybe at a 10% cut in pay. This allows people to get through the recession.

Sadly, the capitalist system is designed for financial vultures. They take advantage of the depressed economy to buy over assets from the vulnerable people at low prices. This is how the financial vultures get rich.

We need a socialist system to provide better protection to ordinary people. A capitalist system is bad.

This is why I prefer a socialist system, even a communist system.

 

Tan Kin Lian

 

 

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READER COMMENTS BELOW

5 Responses to “There is nothing catastrophic about a recession”

  • xoxo:

    Supply Chain is being used as a scape-goat for the EXTREME GREED of businesses n govts that pushes up price$ in the current inflation.n
    Why during a pandemic,stock markets rise.
    And ,even with the current correction,indice$ have ri$en on a net basis.
    Why more billionaires minted and higher net worth$?

    Its all about GREED in truth.
    The world’s population has not increased at such rates as has the current round of inflation.DEMAND?
    NET INCREMENTAL IN CONSUMPTION?
    WAR IN UKRAINE?

    So,will PRICE$ DROP if Ukraine war ceases?

    We will see other rea$ons being manufactured as a facade for GREED!

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  • opposition dude:

    It sounds great to get a loan from the state but with PAP around it’s akin to them giving us free money which is, naturally, a big NO NO from them. Or they would go charge you high interest rates when you need to repay the loan, loanshark style, except that this is all legal since it’s the government and not an actual ah long.

    And as for reducing working hours you can wait long long. Any company would definitely chop heads off as it’s the fastest way to save money, just look at when Covid hit and the numbers of people that lost their jobs. Did any of them looked at the option to reduce working hours like what textbook Tan is suggesting above? They would rather retrench lah!

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  • only stupid people vote pap:

    Like someone who said in TRE, and we agree, start buying RMB. Sell of as much US$ as possible.

    Even sell off S$ if can. Buy that RMB.

    After USA has died, and pap has died, the RMB will still be around.

    Although they are many pro pap voters in TRE, once in a while we get wisdom from the TRE. Buying RMB recommendation is one of those wisdom in TRE.

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  • I_am_Mike:

    @ TKL

    You are a beneficiary of a Capitalist system. And now in your crappy old age, you seek a Socialist and Communist system.

    You use gas stove to cook your meals for the past 50 years. Then one day, your gas leaked and burned down your kitchen. You blamed the gas. You want everyone to change to induction cooker.

    So, one day your induction safety feature does not work, your pot over heated and once again you burned down your kitchen… so funny one… you want everyone to stop cooking in their own kitchen and subscribe to central kitchen cooking and delivery the meal to your home.

    Cheaper, better, faster! Don’t have to own a kitchen, can reduce your home space and buy your home in ‘cheaper’ price.

    Sounds familiar? Don’t you worry, each day our G are moving closer to become a communist nation. Even without you realising it. Communism is the same animal you have been keeping in the past 70 years.

    TKL, I would like to see how your karma would be.

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  • BK:

    Historically, there was a time, the Soviet Union was thought to be a peer competitor to the West through central planning; aka Communism.

    Ballpark, in a standardlized, industrial manufacturing environment, the Soviet was just as competent. They also had brilliant scientists. So what failed?

    “…Russia could at least appear to hold its own in a technological race defined by the ability to build giant rockets; it was left completely flatfooted when the West started putting powerful computers on a chip. In fact, in the last few years even Japan’s great corporations have started to look a bit like dinosaurs, lumbering helplessly in pursuit of the little startups of Silicon Valley.

    Another possible answer is that capitalism triumphed because of ‘globalization’ – a process everyone talks about but which we really don’t fully understand. For some reason – perhaps some synergistic interaction among declining tariffs, cheaper transportation, and better communications – it has become possible in the last generation for many countries to industrialize rapidly, not through massive programs of government-led investment, but simply by throwing themselves open to the world market and letting events take their course. Socialist economies could not avail themselves of this new opportunity, and so they began to fall beind instead of catching up…..” Paul Krugman.

    Thus, by 1970s, China could see Soviet Union failing, Deng changed tack, no more “iron rice bowl”, move to private enterprise, private initiatives. Capitalism with so called Chinese characteristics.

    “…A market system, of course, works whether people believe in it or not. You may dislike capitalism, even feel that as a system it will eventually fail, yet do your job well because your family needs the money you earn. Capitalism can run, even flourish, in a society of selfish cynics. But a non-market economy cannot. The personal incentives for workers to do their jobs well, for managers to make good decisions, are simply too weak…”

    Capitalism with Chinese characteristics move within a spectrum bwt say North Korea or Switzerland. Among the top capitalist countries, like Australia, NZ , their social benefits far exceed China. Only Spore is the outsider among these countries.

    US is not in the top 10.

    So again. TKL is consistently playing the Chinese chauvinist card. His simplistic offerings are only to incite such chauvinism.

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