Even its name, "global financial crisis", has only been settled on recently. Sometimes its the "global financial system in crises", or the "recession/depression".
It is clear to anyone after countless articles and interviews that no one in the financial community (let alone politics) knows what is going on, how it happened, or what will happen next. Increased coverage just underline how the community all see different events as being the cause for different outcomes. One day the problem is short selling, then it isn't, and so on. Its as if a comet had presaged an alien invasion.
The simplest reason that accounts for no one being able to describe things is just that they don't understand them. Which seems obvious. No one completely understands the economic system, perhaps because this is the first time in living memory there has been any need to.
For some reason, experts and lay people insist that the economy is now more complex, apparently because of mobile phones and the Internet.
Is it really? I can't see what major elements of economics (people, goods, services, value, money) have altered. The fact that I can buy shares from my yacht, and look at their performance on a web page wouldn't appear to change these basics. Certainly events follow more quickly. But while there are now more exotic ways to do the same things, people need banking today for much the same reasons as they did 100 years ago.
The crisis is also grandly referred to as "global", as if before this month, the economy was a local phenomenon. Given that the most basic consumer objects owned in the West come from Asia, this really seems ridiculous.
There doesn't appear to be one good agreed concept or idea to help people simplify the economy in their heads. Contrast this situation with, say, evolution, where Mr Darwin's ideas are available and explicable to more or less anyone. Or, if you prefer, consider gravity, or the Prisoner's dilemma.
This is one case where the Crowds do not appear to have much Wisdom. Without the basic mental tools, more comment just generates more heat without the light. It may be that it will be a few decades before enough is understood for this period to be properly documented without being sold short.
3 comments:
May I borrow your yacht for the weekend please?
If you have difficulty understanding the current world financial situation, the following should help...
Once upon a time in a village in Africa, a man announced to the villagers that he would buy monkeys for $10.
The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts.
The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.
In the absence of the man, the assistant told the villagers: "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when he returns from the city, you can sell them back to him for $50."
The villagers squeezed together their savings and bought all the monkeys.
Then they never saw the man or his assistant again, only monkeys everywhere.
Welcome to WALL STREET.
I sold my Yacht to pay my broker, sorry.
Post a Comment