I’m finding it kind of a weird coincidence that I finished Roubini and Mihm’s Crisis Economics: A Crash Course in the Future of Finance just as stock markets have started to tank.
Somewhat ominously, not only did one of the co-authors, Nouriel Roubini, foretell the recent meltdown itself; turns out the book’s afterward quite accurately predicts the aftershocks to the world economic system that are currently unfolding, almost three years after the event. (One reviewer of the bo0k calls it “required reading”. I agree.)
There’s a temptation to believe (or, perhaps, hope) that all that emergency ‘stimulus’ spending put that nasty old disruption behind us. Canada, in particular, has been extremely self-congratulatory about how its management of the crisis has left our economic health (largely) intact. Unfortunately, that kind of talk is mostly wishful thinking.
The economic tsunami just past wasn’t a single-cause event. Wall Street, for all its rapacious greed and shameless exploitation of moral hazard, is just a convenient starting point for mapping out responsibility – there’s plenty more fault to go around.
Not just households, entire countries, have been, and continue to, live way beyond their means. Unsustainable economic thinking and pollyanna planning have replaced anything resembling reality for long term economic health. Boom and bust, in ever-expanding amplitude, are the inevitable costs of capitulating to (mostly political) expediency over doing the right (economic) things.
The aftershocks are currently unfolding while the whores on Wall Street are fashioning yet more and different “proprietary investment vehicles” and the stewards of the economy are whistling past the graveyard. If you want to bet on something, try this: The ‘stimulus party’ is over; the bill for it is in the mail and the wages of profligacy wait to be paid. Sadly though, the ‘bank of last resort’ (your government) is looking more and more like Wimpy (from the Popeye cartoons) is its chief economist.