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Unfinished: What’s About to Happen

The field of economics has had plenty of time to study recessions. There have been a dozen recessions since the Great Depression and each one had different causes. And all of them eventually subsided. In a way, economics shouldn’t be all that hard to understand. A collective misallocation of scarce resources (right now, this misallocation was from the housing bubble) causes a pullback of other scarces resources until new wealth can be created and all the misallocations are reevaluated.

This process of creative destruction isn’t new and it doesn’t take much energy to understand. Let’s say you spend too much money accumulating a resource, say beanie babies, assuming they will always appreciate in value. When the market on beanie babies suddenly bottoms out due to changing fads and overproduction, your assets have declined in value and you’ve lost a big chunk of net worth. So, you adjust your spending habits and try to wait out the stress

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