Originally Posted by JavaBlack

They will,eh?
Or will they panic and start calling for greater protectionism and isolationism? Maybe start taking on a more xenophobic worldview, getting scared of all them foreigners that might come in to compete for the jobs that are disappearing...

You're taking on some kind of a deterministic stand. You assume that things do fix themselves.
Not always. Sometimes systems collapse. Sometimes they retreat into protectionist systems that slow growth and actually impede the economy more than if we just did something to ease the pain!

The problem is that the economy does not exist independent of the rest of society. All the economic assumptions you make assume that order remains, that people carry on, that no one panics, that stuff just happens automatically.

I can also predict that someone who eats several pounds of cheese will eventually pass it... but I'd still suggest laxatives.

The point is that by cutting down the pain people feel from the global economic changes and boosting their feeling of security, they will be eased into making those rational decisions rather than panicing and demanding radical change and rioting in the streets.
Rioting in the streets... I hate to tell you... is pretty bad for the economy when it comes down to it.

Complete disorder and a population that demands insane levels of protectionism... well, that leads to more economic distress than slightly higher taxes.

See, the world is not in its whole just a wonderful free market economy where everything runs smooth if no one screws with it. It's an anarchic place where we manage to keep a free market only because people overall agree to its rules. When people stop agreeing... it goes back to anarchy.
You can call that a "free market" in a sense... but the currency tends to be more like blood.