Controlling the weather

Somewhere along the line we got the idea that we can control our own economic destiny.  Maybe its just a natural outcome of our ability to control our bodies medically with science and technology.   We mastered virus' and bacteria.  We mastered outer space and the moon.  We mastered the atom and nuclear energy.  Now we thought we had mastered the economy.  Those in power I think imagine themselves standing in some large control room with lots of knobs, buttons and levers controlling our economy, when in fact they truly have very little power at all.  Those who think they can control the economy must also think they can control the world's weather too.  But like the weather, there are too many factors (countries, politics, religion, languages, natural disasters, disease ...) and too many unpredictable inputs (6 billion people to start with).  But this has never stopped man from thinking too highly of himself. 

They thought they had found the magic solution to all of our problems by controlling interest rates.  They thought that by lowering rates they can stimulate the economy and by raising rates they can slow its assent.  But there in lies the problem.  When the economy begins to cook, few want the party to end and so hitting the brakes is difficult to do.  One the other side, when when the economy shows signs of slowing, they are often to quick to lower the rates and often cause areas of our economy to bubble.  This is because ONE KNOB affects too many areas or sectors at the same time and therefore while some areas may need lower rates, others are not.

The other problem with our managing the economy, is we artificially create non-recessionary periods.  These are not "bubbles" in the classic sense, but are periods of false prosperity with no need to put money away into savings.  We have seen this happen starting in the 90's.   After returning from a very short recession (mostly caused by the Gulf War), we never saw another major recession for about 16 years.  Even after 9/11 which we thought would be a major hit to our economy, very little happened.  We thought we had become bullet-proof and our level of savings over the last couple of decades deteriorated to less than 0.  Anytime the economy looked shaky, down went the interest rates to stir the markets.

In the past, recessions and booms were as common as winter and summer.  Our parents saved their money in the good times because they knew "winter" was coming.  We took those slow downs as just facts of life... like gravity.   What goes up MUST come down. Those savings also became the foundation from which future business growth could emerge.   But now since we held off the downturn for so long people thought saving money for a rainy day (or winter) was ridiculous.  It was like we were controlling the weather and winter was a thing of the past. But now look where most Americans are today.  Huge debts.   No jobs.  And most of all, NO SAVINGS.   This may become the perfect storm of economic disasters as it will be a double whammy to our economy.  First, people will have no savings to live off of when the stimulus bubble pops and second business will hot have enough capital to restart.

The answer is to tell those who think they know what to do to "Please step away from the machine" or "Get your bloody hands of the control knobs".   You see the machine they are manipulating not only has too many input factors, they have no clue as to how the machine works inside.  They say "Lets try this!"  and then when the machine makes a large screeching sound, they say "OK, Let's NOT do that!".   But its US inside the machine that is making the large screeching sound.   We are the ones being hurt... not them.   We are paying the price for their arrogance.