Death Rattle of a Country

Monty Pelerin / Economic Noise

What Is A Death Rattle?

Wikipedia defines a death rattle as the sound often heard before death:

 

A death rattle, known clinically as terminal respiratory secretions or simply terminal secretions,^[1] is a sound often produced by someone who is near death when fluids such as saliva and bronchial secretions accumulate in the throat and upper chest.^[2]

Economies do not utter sounds in any stage of existence. But the health of the economic body can be measured via economic assessment(s). Youthful and vibrant economies grow rapidly, usually producing growth rates in excess of high single digits. Mature economies grow less fast, but do grow at rates fast enough to keep resources fully employed and the living standard increasing. Dying economies stagnate. This last stage is followed by a death rattle.

Economies and countries do not have biological clocks like real living species. Nature is not in control, man is. Man is responsible for all stages of an economy.

How Does an Economy or Country Die?

The last stage of an economy is stagnant or even negative growth. Unemployed and underemployed human and physical resources characterize this stage. So, too does a declining standard of living.

Two factors are always responsible for this stage — economic quackery and political interventions. Any economic slowdown is seen to be solved by additional economic stimulus and political intervention. More government is always the solution, or at least has been since the 1930s. Both economists and politicians are too happy to accommodate because each accommodation improves their condition.

This modern day witchcraft is considered effective because “it has always worked in the past.” Surely it will work again and save us from any pain. What is not seen is that every intervention weakens the economy. While the economy rebounds, mostly as a result of self-corrective price adjustments but also likely sped up by the stimulus, some harm has been inflicted. This harm is cumulative, building up over the years until the economy becomes so distorted and dysfunctional that the price system becomes dysfunctional and capital is so badly misallocated that it becomes unproductive. At this stage no amount of stimulus can restore or save the economy.

read more at Economic Noise:

http://www.economicnoise.com/2014/05/07/death-us-one-picture/