Good things come from a Recession?

Robert J. Samuelson wrote Recession's Hidden Virtues in last week's Washington Post. I never thought of a recession have any virtues.

"Recessions also have often-overlooked benefits. They dampen inflation. In weak markets, companies can't easily raise prices or workers' wages. Similarly, recessions punish reckless financial speculation and poor corporate investments. Bad bets don't pay off. These disciplining effects contribute to the economy's long-term strength, but it seems coldhearted to say so because the initial impact is hurtful."

The Fed faces a similar problem. If it tries too hard to prevent a recession -- through easy-money policies -- investors, businesses and workers may conclude that they have nothing to fear. They may then engage in precisely the risky and inflationary behavior that makes matters worse, perversely "resulting in an even larger bubble and a larger subsequent recession," warns economist John Makin of the American Enterprise Institute.