Louis Gray nailed it last night when he wrote that there are no experts in this financial crisis.
In the past 18 hours I’ve read literally thousands of posts and have done almost nothing but hang out on FriendFeed. I’ve seen a LOT of idiocy. And these are supposedly from the smarter, more educated people around. People who I’ve had a beer or two with and who I count as friends and fellow Americans.
I almost went through and cut and paste the worst of it from my FriendFeed stream, but it won’t help to make people feel bad or get into arguments now. The damage has been done by our idiocy (both in creating this crisis) and in deepening it by not fixing the credit crunch (also our idiocy).
Now, what happens when people stop buying things? Like it or not, our economy is based on credit. And the way banks work is if you save one dollar, they lend out a lot more than one dollar, which gives the banks scale. Also makes them go under if they make too many bad loans, like they did, or people take money out of the banks, like we are (billions were pulled out of Washington Mutual in the last few days before it failed).
What happens next? Economy goes into stall. Why? If people with good credit can’t get credit to buy cars and houses and expand their businesses, they stop doing those things (it’s made worse by the psychology that we’re in right now, which is to hoard, hoard, hoard and not buy things). When we stop buying, companies start showing losses. People get laid off. They file for unemployment. Ahh, so we’re going to pay anyway, only this payment will go on for years until we figure out how to get car manufacturers and real estate agents and so forth back to work.
It’s enough to make me scream.
The downside of this new media world is that you’ll hear a lot of opinions. Which one is right? I’m not always right. In fact, I’m often wrong. But I’ve counted on YOU, the audience, to help me correct that when I’m off in the deep end. Now, though, I’ve seen so much idiocy that I’m not even sure of my audience anymore. That’s how deep our loss of confidence in each other has come.
I find I’m becoming a lot more like Andrew Keen. That scares the shit out of me. Why? I find I’m looking to experts and elites more and more, because the crap I’m seeing out of all of our mouths is just so, um, wrong. As my history teacher back in the 1980s used to say “the masses are asses.” This is shaking my belief system pretty thoroughly, because I actually do believe that a decentralized system is stronger than one with one guy or gal in the middle controlling everything. But for a decentralized system to work we have to 1. be smart and 2. believe in each other. Those two things are proving to me to be pretty trying right now.
I liked what David Brooks had to say in the New York Times this morning. He said “I’ve spoken with several House Republicans over the past few days and most admirably believe in free-market principles. What’s sad is that they still think it’s 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy. We’re living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial. Then the money managers panic and it sloshes out, punishing the just and unjust alike.”
We’re in wild economic times. What should be done now? I’d still do the bailout, although that will lead to inflation and a devaluation of our dollar. We have to choose between that, or really high unemployment, which will lead to devaluation of our dollar as people file for unemployment in a few months anyway.
One thing I’d love to see is more people joining in on FriendFeed to help pull out the high value bits and provide more sifting to find both the rotten strawberries in the marketplace of ideas, as well as find the really juicy apricots. I’m doing just that on my feed of “Likes” and “Comments” there, so you can see what I’m pulling out of the 3,400 people who are feeding stuff to me.
If you have a feed that you’d want me to listen to, please let me know.
More idiocy to come, I’m sure! Hopefully we’ll all survive.