Why the obsession with dodging recessions is a bad thing

Central banks around the world have done a lot of damage in recent years trying to avoid recessions instead of their real job of keeping inflation under control.

Rather than something to be feared and avoided, recessions are an unavoidable and necessary part of any economy.

In fact, we get recessions in various industries all the time, and what shows up in GDP data as a recession is actually one where more industries are retreating than advancing.

Anyone my age was raised by parents who had either first or second-hand experience of The Great Depression. This was a period of severe economic downturn that, in the case of the United States, lasted until the end of World War II.

In Australia, unemployment rates rose to 30 percent and GDP declined by roughly 24 percent over a period between 1930 and 1933.

That time certainly shaped my parents' habits. Financial conservatism was matched by habits of frugality, like always turning the lights off when you left a room.

That shaped a period when personal and business finances were more robust than usual because of the dire experience of when they were not.

In my early years, I suffered a number of downturns-although nothing like the 1930s.

The closest was the recession of 1982, billed the "worst recession since the Great Depression," but with an overall contraction of only 5.1 percent.

There was a negative quarter at the end of 1965 caused by drought (I actually remember a front-page image of a parched and cracked dam with the remains of a dead sheep rather than the financial stress).

Then there was the recession in 1974 caused by the Arab oil shock, followed by the one in 1977.

Unemployed people line up outside the State Labor Bureau in New York City during the Great Depression on Nov. 24, 1933. Following the crisis, Western society was deeply influenced by the theories of Keynesian economics, which advocates active state intervention and regulation of the economy by using finance. (AP Photo)