LATEST ENTRY

ECONOMICS | Noah Brier

Everything is Peachy

My pessimistic look at the current state of the economy.

September 18, 2009 | RSS | EMAIL | PRINT | 11 COMMENTS

All of this talk about us coming out of the recession is making me really uncomfortable. It's not that I don't want to see the country recover, however, I can't help but feel as though the trope of the last 12 months, one centered around a "reset" in the world's economy, has been forgotten (and maybe never was). I've felt this way for a few months now, though I must say it's been inflated for me by the dealmaking in the tech world of the last few weeks.

It started a few months ago as I kept reading about executive after executive explaining to the world that business was fundamentally changing and then, in the next breath, explaining how their company would come out the other side unscathed. I kept thinking that it felt akin to the whole world believing they're above average, ignoring that if that were really true, average would just go up and they'd all be back to square one.

Anyway, I was having a conversation about this at likemind this morning and felt like writing something about it and then I read this interview with Nassim Taleb and knew I had the quote I needed to anchor an argument:

The government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient's symptoms - and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed - a lot more than that if you count hidden unemployment.

That's exactly it. I am ultimately worried that we haven't really fixed anything and instead have just postponed something, transferring the problem to another time (and maybe even generation) so we can go back to a world of building faux-value: A world where we start to believe our own hype, thinking that just because we've cooked the balance sheet to make things look better that we've really fixed the problem.

I don't mean to be a "Debbie Downer" or anything, just really felt like I had to write all this stuff. I don't know the answers or even think that I'm immune to the "good times" thinking.

That's all, carry on with the happy thoughts.


PREVIOUS ENTRY | NEXT ENTRY

LEAVE A COMMENT

First name, first and last, whatever you feel like.

Required, but not displayed (so don't worry about spam).

If you've got one, flaunt it.

You can use some HTML (a's, br's, p's, oh my!) if you'd like, if you don't know what that means, don't worry about it.
REMEMBER ME?

COMMENTS

1Will Olbrys

Your fears are appropriate: http://www.npr.org/templates/story/story.php?storyId=112815880

September 18, 2009

2Dave

I agree with you Noah. Back in 2007 I had a feeling things were going to get bad and put all of my money into Money Market funds. I haven't invested back in the stock market yet because I think there is still a lot of "adjustment" to be done on the economy. Hopefully it doesn't sound pessimistic. There is just this huge gorilla that is wage disparity between the United States and China, whom we receive most of our imports from. How can US manufacturing compete with wages being so low there?

Lots of unanswered questions - I believe capitalism is the winning economy of the world, but the US is definitely over-extended and debt-ridden as a country and as citizens.

September 18, 2009

3Sriram Venkit

I have always wanted to know this: I read somewhere that recession is three months of negative GDP. So if you fill that gdp with debt money, and if the debt money then shows up as the "product" in gross domestic product, then how do they calculate real growth? I guess I'm making it pretty evident that I know very little about economics and would appreciate some education.

September 19, 2009

4Slavin

Indeed, I've often wondered (and can't stop wondering, lately) whether it's everyone understands something I don't, or vice versa.

Or, maybe, whether they know it too and just don't see the point in worrying about it. Which sounds pretty good, I'm just not good at that.

September 19, 2009

5Dennis Demori

Your concerns are understandable.

The government is trying to "fix" huge problems (economy, healthcare, etc.) with duct tape when what we really need is a complete overhaul. I put "fix" in quotes because I'm skeptical that the majority of politicians are really trying to fix anything at all, regardless of party affiliation.

Until they have the strength to detach themselves from lobbyists and special interest groups I see very little progress in the near future.

September 19, 2009

6rob f

We chronically underestimate future pain; requiring our political representatives to operate under a balanced-budget paradigm may be the only way to prevent our children from our now accustomed excesses.

Money can be created by governmental edict; wealth cannot. Let us never confuse them.

September 21, 2009

7Ana Andjelic

Noah, how is this different from any previous financial crisis (the great depression included)? Never in the recent history of social development there really was a quick and overreaching change in the system of existing relations (well, maybe the fall of Communism, and look how well that turned out).

So yeah, each and every generation leaves behind a legacy of unsolved problems (social, economic, political, legal). The history of law is actually pretty interesting, but i am drifting off the topic here.

A change does not happen in a lifetime. But what each generation does is provide small solutions (quick fixes so the system gets to function again). It's like fixing an old car - you just want to get it running.

All of which by no means does not diminish you concern. It's just that large, complex, systems can be changed only incrementally. And if there's even one small change that the past year of recession has had brought to our financial/economic/political system, then that is already great.

September 21, 2009

8Peeyoosh Chandra

HI Noah,

You are right. In fact it appears that our generation is a victim of past generations.

John Saul put it best in his book - "Voltaire's Bastards - The Dictatorship of reason in the west".

"Inflation was a harmless economic tool. Moments later it was little better than the assassin of free men's hopes. Then we woke up to discover that an investment device called debt was an even great evil."

In NZ, the effect of the govt. borrowing to stabilise the economy means that the next 3 generations will be paying off that debt i.e. no forward economic movement and next to no access to local capital to invest.

Still without this intervention, I wonder just how bad it would really be.

Let's hope that collectively we can take the bitter pill required to set us back on an even footing.

September 21, 2009

9prince

you are absolutely right (instead of just right. :) )

The fact that things are fucked up though is not the depressing part. The depressing part is that you have a generation of people willing to 'bite the bullet' and sacrifice for the betterment of themselves and future generations but they are being ignored. Ignored by the people who got us into this mess in the first place.

But Drew Brees is making my Fantasy Football Team look like the second coming so I'm o.k. Until I'm unamused by all the amusement I say 'be merry'!

September 26, 2009

10David Hall

The economic future does not look good. Alex Jones new film 'Fall of the republic' breaks down exactly what is happening in America today.

Check it out:

http://www.youtube.com/watch?v=F8LPNRI_6T8

October 24, 2009

11drdarst

agree in principle with you. So much remains unchanged. Credit is now tight and so the big losers are the common consumer who needs things and is 17.5% unemployed. ?Complex investor instruments are still created and counterparties to trades are wiser but still enthused by fees The trope, as you put it, is obscured now in November 09 by the glitter of the the momentary ups.

November 23, 2009