Over on the Corner today, John O'Sullivan links to a lengthy interview with Martin Wolf, chief economics commentator at the Financial Times. O'Sullivan says Wolf's remarks in this piece are rather alarming because he is known for his intelligence, experience and lack of a Cassandra disposition. I'll post an excerpt here, but I'm hoping ye with greater experience in and knowledge of economics will share your opinions. Here's the heart of it:
The uncertainties are so huge because of the complexity and the novelty of this situation that it really is impossible, it's simply impossible to say what's going to happen. I have my own guess that we're going to have a pretty deep recession and it's going to be a long process of recovery in the financial system and in the American economy. But that is a guess and I might well turn out to be wrong.
But he goes on to lay out some conceivable scenarios that are far worse. The takeaway is that this thing could get extremely bad, and nobody can say what it's likely to do with any confidence.
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Interesting but shallow article.
The real question to my mind: is this economic turmoil a reflection of a real loss of wealth, or if it is merely a reorganization of it? For example, the Great Depression was merely a reorganizing - we were growing real wealth the entire time.
Note he did not even talk about if it's possible that peak oil has triggered this crisis, and if it could create a slowing of growth worldwide over the longer term. He's a finance guy; this kind of stuff is not even on his radar.
Notice also that he did not talk about current and future problems with human capital. Nations with the highest IQs and most productive economies are dropping rapidly in native populations at the same time their moral culture is imploding. Not good. And by 2050 the entire world will even be shedding people; we know that wealth is driven by people, ideas, and things, so decreasing ideas and people at the same time could well cause loss of worldwide economic growth. Again, as finance guy, he is clueless about the cultural issues that effect long-term economic growth. He's looking at his bottom line right now.
A rising tide raises all boats, and a lowering one leaves all struggling and many high and dry. I'm more worried about the direction of the tide, yet these finance guys worry only about the individual particulars. It scares me that our cognitive elite tend think very small and short term, and this article is an example of it. We could very well be on the edge of something big in the world economy, but this article is all noise.
A rising tide raises all boats,,,,,,,,,,,,I used to believe that. Looking at income distributions for the last 8-10 years makes me think otherwise.
Its pretty much a given that you seldom get economists to agree on much of anything. One thing that I have seen a lot agree on is that its hard to assess how bad things are now because there are so many hidden problems and its not really possible to predict how many people will walk away from their mortgages.
Steve
Looking at income distributions for the last 8-10 years makes me think otherwise.
Good point. When 1 in 10 Ohioans now receives food stamps, we have to wonder if America will soon look like Mexico - a few at the top, and the rest on the edge.
Consider how the "free" market of commercial papers under the Fed's "interest-rate policies (market manipulations) orchestrated a massive shift of interest-rate risk from the financial sector to the household sector."
As Greenspan began his tenure at the Fed, the capital markets assumed $454 billion in home loans were "backed" by government sponsored enterprises (Fannie Mae and Freddie Mac). As his successor attempts to salvage something from his tenure, that figure has not tripled, quadrupled or octupled but rather decupled to today's c. $5 trillion.
Fantastic commercial success?
Superior competitive performance?
From a 'government sponsored enterprise' you say?
Pulleeze! What flavor of conventional politics predicted that?
Well, the one we all call 'American' - a crass business model of "nationalizing debt" will see the GSE's expanding their (our?) marketshare of "toxic waste" to $7 trillion, see chart at www.prudentbear.com/index.php/archive_menu?art_id=5026 and scroll for commentary under "Nationalization" at foot of page:
The crux of the matter is what do we mean by the "value" of money?
Some would say money has lost its capacity to express "value." Canadian Paul Grignon's animated short on GoogleVideo and Youtube called "Money as Debt" paints a dim view of how much of real lasting value is actually deposited in our financial institutions. [N.B. viewers are advised: suggestions offered at the end for a collectivist tax-free utopia are far-fetched so I won't vouch for a lack of bias, and certain vague references to international conspiracies haunt a few frames, but there's no outright calumny of any living person or group of persons or religious tenets.]
Perhaps the fulcrum of the crux can be expressed even more succinctly, tying into your Scruton post: how do we measure value?
We are free to act virtuously and share our earthly gains with others. Yet do we have the liberty to act for the common good as we judge fit in free markets (where "priceless" indicates a good of such precious rarity that it may only secured by refining and chastening one's actions to attain it), or
Are we threatened by bondage to those who can exploit the prevailing guile inherent in our venal natures? Before P.C. censored our use of "value-based"vocabulary, those who misappropriated deposits were referred to as embezzlers, no?
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