The Instability of Economic System and the Errors in Economics

Giovanni Antonio COSSIGA


The instability of an economic system is an almost normal condition, because it’s widespread. But it is a distortion if compared to the path of a stable economy. A stable economy follows a straight growth, with a steadily rising slope. In the world of instability, however, the economy follows a sinuous path, because the recession and the monetary signals come into play. Inflation and deflation are only the messengers of the unstable state and also signals to change course. They are ectoplasms created by the world of instability, to stimulate the return to the stable condition. A full frontal against the messengers makes no sense. Instead we need to hold the message and eliminate from the management of the economy those errors which derail from the compatible path and in parallel from the environment around us. The derailment is not definitive, because the events of the unstable sub-world show that the forces acting therein (the recession and the speculative excess) and the monetary messengers have the function of correcting the errors. The cycle of the conjuncture and, in extreme ratio, the speculative excesses are the correction tools, to bring the economic system back to the stable condition. Basically, the recession is a sequential intervention curbing the economy growth, to rebalance the systems’ potential according to the distinct but coherent course followed by our planet. The inflation is the messenger that measures the intensity of the gap between the two levels of development: the humanity and our natural environment. The deflation is instead the measure of the excesses suffered by the economy for the improvident idea to push the economy development beyond the limits imposed by compatibility. The deflation is the measure of excesses in terms of private and public indebtedness, and cheap credit. It is accompanied by a weak growth, which also requires new debt and money availability. The process, if not interrupted, starts the phase of misleading and doped speculation, which will end with a serious economic depression and new social troubles. We should not fight these instability monsters. We need to prevent them, instead. Our world seems to be running towards a new speculative fire. Trying to force the exhausted systems’ course is to light up the smoldering fire. The economy needs a period of calm to heal and reabsorb excesses. Monetary policy must raise up its guard, while fiscal policy must renounce the belief that we have the tools to tame the conjuncture cycle and to submit it to the wishes of our unscrupulousness.

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