charles hugh smith-Weblog and wEssays: "So what happens when authorities stamp out all small forest fires? They create the perfect conditions for a gigantic conflagration. The flaw is the old forest management policy of suppressing all forest fires was revealed when a huge uncontrollable fire swept through Yellowstone National Park some years ago. In other words: a system which allows occasional fires is resilient, while one which suppresses all small fires guarantees a giant conflagration.
In financial terms, this 'normal cycle' of growth, small fires and regrowth is 'the business cycle' in which credit and business expand, eventually reaching an unsustainable level (high inventories, too much debt and capacity, etc.) Businesses go bankrupt, defaulting on credit, people save rather than borrow, and capital is accumulated for the next cycle of investment and borrowing. "
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