Here are some things I don't believe:
***People of great character are needed on Wall Street. Nice idea, and I'm all for it—more or less. Fact is, humans are greedy—you know, the survival thing explained by Darwin and his successors. Moreover, Adam Smith's Wealth of Nations tells us in no uncertain terms that self-interest is the engine of the economy. Fact is, in ordinary times, self-interest is imperative, and more or less the more the merrier—i.e., greed. That's how innovations are commercialized—and why there are bubbles. Hence, this ends up being an argument for appropriate regulation and strong government intervention in general, rather than hoping that God-like individuals will save us, or at least our 401(k)s. (None of this is to suggest that I'm not in favor of beating the bloody tar out of some of these pricks, like the Lehman guy.)
***The world is flat. Sure, flatter than it was. But national sovereignty is alive and well—e.g., Russia invades Georgia. Central banks and finance ministers should work in concert, as they are and as they have been since at least Bretton Woods. Given the new flat-ish-ness, coordinated responses have to be made much more quickly, and dramatically, than before. But anyone who thinks that economic globalization will round off the forces of national sovereignty is flat out nuts in my opinion.
***We need a plan. Yes we do, but the market crisis will abate when the price of assets falls far enough that stocks are obviously significantly undervalued and worth buying. Mssrs. McCain and Obama are being criticized for failing to provide oceanic solutions in their get-together last night. Well, there aren't any panaceas, except to do more of what we're doing ever faster and ever more intensively—e.g., the Brits more or less nationalizing banks yesterday.
***Cut costs to the bone in individual enterprises. Yup, that's the self-interested answer—which I just touted. Problem is that cutting costs accelerates and deepens the recession when Susan and I delay a home construction project as we just did—in our case, it puts the hurt on the local contractor. (We've already extended a couple of projects purely to avoid such an outcome.) When the cycle of delayed or cancelled purchases accelerates, then, God help us. Or, rather, God help us, period—it's happening. The only major exception I can think of is companies with cash hordes who choose to make investments that will greatly disadvantage their competitors when the worst is past.
***Oh my God, even GE has problems. Worrisome indeed, and psychologically important, but for heaven’s sake, as we conjure up remedies, remember that all of our economies consist primarily of small companies with local markets ($$$$, employees, and in our case "American spirit"). Policy must be aimed at least as much or more at the world of the "millionaire next door" (or the biz with $200,000 revenue) as the big dudes.
***Governments never get anything right. True, governments over-regulate, then under-regulate, with blunderbusses, not scalpels. But there are times when "more government" is the solution, not the problem. This is clearly and unequivocally one of those times, like it or not—even congenital free traders like Paulson get it. (Greenspan seems to be the only one who doesn't get it—a little too much Ayn Rand as a lad.)
***Globalization is still inevitable. True, but with a timetable very different than imagined a couple of years ago. The reverberations from this crisis will probably be with us a decade from now.
***The worst is behind us. Nobody but nobody has a clue, but "the worst is yet to come" is the odds-on favorite. (We are really trying to find viable prices for stuff that in the "mark to market" sense are valueless—to the tune of trillions of bucks.)
There is no particular point to these musings. It's just my mind at work since I am totally unable to focus on my normal affairs given the economic situation and the election. I warned you not to "mark time"—but I am. I also warned you not to let depression get the best of you—well, it's sure got me by the ^%*. (I'm not talking personal economic woes—though "life is good" would be a stretch. I'm talking about significantly debilitating disorientation.)
Before blogging became all the rage, Tom was posting book reviews and Observations (essentially early blog posts) to this site. You can find the archives below.
What we're talking about
on the front page.