In economic theory, a “trade cycle” always begins with the stage of money distribution. During this time, the banking system floods the economy with fiduciary money, usually in the form of cheap credit. Entrepreneurs happily jump at this money, believing that things in the economy have got better, rates have fallen, and so on—although in reality the money supply has simply increased. Then mass entrepreneurial errors begin, and everyone starts talking about a crisis. But the crisis actually didn’t start when markets “suddenly” started falling, bank rates “unexpectedly” soared, and enterprises began going bankrupt en masse. No. The crisis began when everything looked very good and even better.
So, when explaining this moment, misunderstanding often arises. After all, if experienced entrepreneurs or analysts, together with experts, see that falling rates are caused not by capital accumulation but by printing little papers, then why do they fall for this trick every time? Why have regular crises existed since the 19th century, and irregular ones since the 14th?
Because we are dealing with what is called a “system.” Indeed, if all participants in the process, including those who simply buy something for themselves at a store, coordinated their behavior, taking into account the process of credit expansion, then there would be no crises. Entrepreneurs would cry “save me” at offers of cheap credit, depositors would watch their savings with particular vigilance and withdraw money at the first signs of rate reduction.
But the thing is, it takes only one or two opportunists to destroy such an idyll. After all, in the short term, following the logic of the system can give advantages. If nobody takes cheap credit and I take it—I will certainly win. And the crisis, by the way, will not happen. That’s why, in such a situation, everyone who can takes credit, and, ultimately, the system feels just fine.
In politics, things are even simpler. Here, cycles are set by elections. And the system exploits opportunism in exactly the same way for self-preservation. It works this way all over the world, and with us, as usual, all these patterns look especially vivid. In our politics, absolutely anything can happen, except what contradicts the interests of the system. Here is a fresh example—the complete refusal by the opposition to use the opportunities that a political crisis would have provided. Let me remind you that the crisis would have occurred if the opposition had managed to “resign mandates” and provoke new elections. But no, they didn’t have the guts for that. It’s understandable—the prospect of the 2015 presidential elections warms the soul, and throwing oneself into the abyss of uncertainty right now is oh so undesirable… In general, you need to take the cheap credit while they’re giving it.
I should note that in this case, we are not talking about what is “worse” and what is “better.” New elections are uncertainty, but they are also opportunities. All I’m saying is that the system has won again, hopes for the better are now concentrated on 2015, and further, further, further…