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Great Crash to Rival ’29?
The good news, as Allister Heath puts it, is it’s not yet clear whether this is the beginning of a major recession. It could just be a major correction, right? (This debate has the feeling you have when you live in an earthquake-prone area and the ground rumbles. Was that a foreshock? Maybe the earth just relieved a little excess pressure and now it’ll be okay?)
The bad news is that I think he’s right about what would happen if there were another financial crash. I think it would sink capitalism for good and probably liberal democracy with it:
We are too fragile, fiscally as well as psychologically. Our economies, cultures and polities are still paying a heavy price for the Great Recession; another collapse, especially were it to be accompanied by a fresh banking bailout by the taxpayer, would trigger a cataclysmic, uncontrollable backlash.
The public, whose faith in elites and the private sector was rattled after 2007-09, would simply not wear it. Its anger would be so explosive, so-all encompassing that it would threaten the very survival of free trade, of globalisation and of the market-based economy. There would be calls for wage and price controls, punitive, ultra-progressive taxes, a war on the City and arbitrary jail sentences.
For fear of allowing extremist or populist parties through the door, mainstream politicians would end up adopting much of this agenda, with devastating implications for our long-term prosperity. Central banks, in desperation, would embrace the purest form of money-printing: they would start giving consumers actual cash to spend, temporarily turbo-charging demand while destroying any remaining respect for the idea that money needs to be earned.
History never repeats itself exactly, but the last time a recession was met by pure, unadulterated populism was in the Thirties, when the Americans turned a stock market crash and a series of monetary policy blunders into a depression. …
You can read the whole grim thing, which unfortunately I think is exactly right, and tell me whether you agree with his conclusion:
The sorry truth is that there is very little that governments can do at this stage, apart from battening down the hatches and hoping that central banks succeed in kicking our problems even further down the road.
Can you think of a better idea?
And what’s your theory about why the markets are doing this? Everyone has one, but there’s so little way of testing any of them that I’m thinking “animal spirits” is about as good an explanation as any. In other words, The Stock Market Wotan is Angry.
Published in General
Capitalism ended in 2008, so don’t worry about that. We are seeing the Chavez toilet paper shortages on a macro scale; a controlled market where prices are fixed creating secondary effects that prompt more policy interventions. With further cascading effects, which we are experiencing.
There won’t be a revival of socialism. It will be Fergusonism, a kleptocracy where anything you have will be seized. Legally.
I said to a friend the other day that we are witnessing the collapse of globalization. The only way things can work as currently organized is a roaring economy somewhere. The tide is going out and an amazing number of the best and brightest are exposed as naked. I am shocked at how poorly managed US corporations are. They need 4% growth and free money to cover for their blithering stupidity. There is a monoculture in thought with ideas and assumptions that only very intelligent highly educated people could have. And it is working as designed. To everyone’s chagrin.
2008 was an opportunity to humiliate a nation, to force the questioning of faulty assumptions, to force the elites to justify their existence. The trillions from the Fed and Treasury enabled business as usual. This is the result.
This deserves a standing ovation. :) :)
Which is just another way of saying shut up it is worse elsewhere. So what and why should they care? That is those people problem. They are worried about their own.
And there is the Ur, the genesis of the problem we have today.
FDR took a run of the mill financial panic and turned it into the Great Depression. We are still dealing with the damage he did to the Constitution and how we function as a Republic.
Of course they are. It’s what really matters.
It’s a trap. The market is now addicted to the Fed cheap money heroin. Even the threat of taking away the next fix is causing the market to shudder.
Yeah, we have a lot of mobility. And lately much of it is down.
But lets mock the people who are concerned about immigration…