812. The visible not the true: markets

Zachary Karabell writes


Why Markets Are Melting.


Don’t believe the hype: The market collapse has less to do with debt deals, Europe, and downgrades than the ebb and flow of our new, uncontrollable financial system.


Since global markets bottomed in March 2009, there has been an uneasy calm, the capitalistic version of the “Phony War” period between the fall of Poland to Germany in September 1939 and the fall of France in May 1940. None of the reforms passed in the wake of the financial crisis create any breakers against synchronous global financial panic. Yes, there is less leverage and more capital in financial institutions, which is a vital difference between now and then and augurs against a repeat of what happened two years ago, but there are no circuit breakers that prevent the rolling flash-crash of the past week.


And no matter how much we’ve said this over the past three years, when it happens, it is visceral, breathtaking, alarming, and in its own way awe-inspiring.


The internal language and logic of the markets is related to what is going on in the real world, but right now only tangentially.


But notice there is no analysis of why. That is, no analysis of the real state of the world economy, governance, lack of consumers, over production, …

This may be too typical of how economists think, being in the middle of the game with one eye on the ball and another on the crowd and none on what is outside the stadium.

It also leads me to think, are all those people the press quotes as “economists” actually reflecting training in economics?

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