As an economist, what 'ultimate solution' would you propose to prevent crises?

Alright, my friend. If you ask an economist if there's an "ultimate solution" that can solve crises once and for all, they might first chuckle, then tell you: in the complex and human-driven world of economics, there's no "red button" you can press to fix everything.

But this doesn't mean we are helpless. Instead of seeking an "ultimate solution," it's better to build an "ultimate system." This system isn't like a magic pill; it's more akin to a health management system that combines the wisdom of Traditional Chinese Medicine (TCM) with modern medical science.

My "Ultimate Prescription": Managing the Economy Like a Traditional Chinese Medicine Practitioner

Imagine the economy as a human body. It can get sick, become weak, and experience mood swings. Our goal isn't to prevent it from ever getting sick, but to make it strong, resilient to minor ailments, and capable of preventing major illnesses.

First "Herb": Strengthening the Body (Enhancing Intrinsic Economic Resilience)

This is the fundamental basis for preventing all problems. A person with a strong constitution is less likely to be knocked down by a virus.

• Balanced diet, no picky eating: A country's economic structure must be diversified. It cannot rely solely on real estate, or just on exporting a single commodity. Relying on one thing to get rich today might leave you starving tomorrow if the market changes. Don't put all your eggs in one basket; agriculture, industry, high-tech, and service sectors all need to be developed.
• Exercise core muscle groups: This refers to technological innovation and education. These are the true sources of an economy's strength. Only by continuously generating new technologies and ideas can real value be created, rather than just circulating idly in financial markets. The higher the education level of a nation's people, the stronger their ability to adapt to change.
• Build a strong immune system: This is the social safety net. For example, comprehensive unemployment insurance, health insurance, and pensions. When a crisis strikes and people lose their jobs, having these safeguards prevents consumption from completely halting, providing a buffer for the economy by preventing a sudden "shock" to overall societal demand.

Second "Herb": Regular Check-ups (Establishing a Transparent Early Warning Mechanism)

No matter how healthy the body, regular check-ups are necessary to detect potential issues.

• Measure blood pressure, test blood sugar (Monitor key indicators): We need to constantly monitor several key figures, especially debt levels (total debt of government, corporations, and individuals) and asset prices (e.g., housing prices, stock prices). When these numbers rise too quickly or excessively, just like soaring blood pressure and blood sugar, they are dangerous signals.
• Independent "Check-up Doctors" (Independent Regulatory Bodies): Institutions like central banks and financial regulatory agencies must have sufficient independence. They are like doctors; when they see abnormal indicators, they must dare to speak the truth and prescribe "eat less, exercise more" remedies (e.g., raising interest rates, tightening credit), rather than being swayed by political or commercial pressures that want to "continue indulging."
• Stress tests: Regularly conduct "drills" for banks and other financial institutions. Assume an extreme scenario, such as a 30% drop in housing prices or a doubling of unemployment, and see if the bank would collapse. Those that can't withstand it must quickly be required to replenish their capital or undergo rectification.

Third "Herb": Chronic Disease Management (Curbing Asset Bubbles and Excessive Debt)

Many crises are essentially "diseases of affluence," caused by long-term unhealthy lifestyles. For instance, debt is like fat in the body; a little is necessary, but too much or in the wrong places (like accumulating in heart arteries) can be fatal.

• Control your intake (Counter-cyclical monetary policy): When the economy is overheating and everyone wants to borrow money to get rich, the central bank must "pour cold water," raising interest rates to make borrowing more expensive. This is like a doctor telling you to "eat less sweets." The process might be uncomfortable, but it can prevent future diabetes.
• Get moving (Macroprudential policy): These are more specific tools. For example, increasing the down payment ratio for second homes is specifically designed to cool down the real estate market; requiring banks to hold more "reserves" (capital adequacy ratio) makes banks "stronger" and less likely to collapse due to a few bad loans.
• Core idea: The goal is not to eliminate bubbles, but to gently and continuously deflate them before they become too large and dangerous.

Fourth "Herb": Building Firebreaks (Isolation and Rescue Mechanisms)

Even with the best prevention, accidents can happen. When a forest fire breaks out, the most crucial thing is to have firebreaks to prevent it from spreading across the entire mountain.

• International cooperation: The global economy is now a "global village"; if one house catches fire, neighbors might also suffer. There must be smooth communication and coordination mechanisms among central banks and treasuries worldwide. During the 2008 financial crisis, major global economies jointly intervened to prevent a wider collapse.
• Orderly "bankruptcy": For "too big to fail" financial giants, we must prepare a plan in advance to allow for an orderly, controlled "euthanasia" when they collapse, rather than a sudden death like Lehman Brothers, which dragged the entire financial system down.
• The ultimate "fire brigade" (Central bank's role as lender of last resort): When market panic sets in and everyone wants to withdraw their money, leading to a liquidity crunch, the central bank must step in like a super fire brigade, providing unlimited "water" (liquidity) to the market to stabilize confidence.

Summary: The True "Ultimate Solution" Lies in Human Nature

After all this, you'll find that no single measure in this system is "ultimate." It requires continuous effort, wise balance, and immense courage.

And behind all these institutional designs, the true "ultimate solution" actually lies in overcoming human greed and fear.

• During prosperous times, resist the temptation of "this time is different," and dare to cool down an overheated market.
• During times of crisis, overcome fear, act decisively, and prevent panic from spreading.

What economics can do is design the best possible institutional framework to make it harder for people to make mistakes during euphoria and to have a way out during panic. But whether this system ultimately functions well depends on the people operating it.

So, if there must be an "ultimate solution," it might be more like a philosophical maxim: Stay humble, respect common sense, and always remember that the economy serves people.