Rethinking the Financial Crisis
Writing in his very aptly named Unwritten Laws of Business, W.J. King implored his readers to “distinguish between isolated cases and real epidemics”, which is always a handy knack to master. “Most crises”, he explained, “aren’t half as bad as they appear at first”. That’s certainly food for thought these days, and it brings the psychology of market downturns to the fore. I’ve previously written about the extent of the world’s financial travails, and it’s easy to imagine that the worst is yet to come. But even if that is the case, and I have little reason to suggest it isn’t, just what will that worst case be?
Andy Singh has thought a bit about this, and over at Seeking Alpha he lays out a clear argument for thinking that the Great Depression should not be the model disaster at which we glance nervously. The size of the US economy has been shrinking for around 12 months, but the Depression lasted for 43 months. This, in itself, proves nothing, but given that the deep recessions of the past, including those covering the entire world economy, have ended with boosts in US consumer spending, there is less to worry about now. The European Union and the so-called BRIC countries – Brazil, Russia, India and China – offer much larger consumer spending blocks now.
The world doesn’t rely on just one economic hero any more.