09 July 2011
Obama Wants Innovative Solutions
Paul Krugman, in his OpEd in the 7/7/11 NYT, “What Obama Wants,” ignores the fact that the trouble the nation’s economy is in today follows an unprecedented succession of bubbles. In fact, as a result of the world’s quickening pace of information exchange, bubbles have become the main driver of economic growth in Western economies. Just to take the last two booms—both the Internet-related investment spree of the late-nineties and the real estate-related consumption expansion of the 2000s were illusions that led the public and their supposedly smart financial advisers alike into unsustainable patterns of spending and leverage.
Each time the whirling stops, the dervishes take longer to recover their senses. The question is how long the slow restoration of normal growth in the economy will forestall the next cycle of boom and bust. Economists like Krugman, of course, maintain that equilibrium will eventually be reached. After all, their profession depends on there being a rational order to human activity.
On the other hand, all economic activity can be interpreted as nothing but a global Ponzi scheme—we only produce what others consume in order that they can produce what we need in order to remain in their supply chain, etc. Inevitably, weak links break and forging replacements more and more requires the intervention of irrational, innovative solutions.
Paul Krugman, in his OpEd in the 7/7/11 NYT, “What Obama Wants,” ignores the fact that the trouble the nation’s economy is in today follows an unprecedented succession of bubbles. In fact, as a result of the world’s quickening pace of information exchange, bubbles have become the main driver of economic growth in Western economies. Just to take the last two booms—both the Internet-related investment spree of the late-nineties and the real estate-related consumption expansion of the 2000s were illusions that led the public and their supposedly smart financial advisers alike into unsustainable patterns of spending and leverage.
Each time the whirling stops, the dervishes take longer to recover their senses. The question is how long the slow restoration of normal growth in the economy will forestall the next cycle of boom and bust. Economists like Krugman, of course, maintain that equilibrium will eventually be reached. After all, their profession depends on there being a rational order to human activity.
On the other hand, all economic activity can be interpreted as nothing but a global Ponzi scheme—we only produce what others consume in order that they can produce what we need in order to remain in their supply chain, etc. Inevitably, weak links break and forging replacements more and more requires the intervention of irrational, innovative solutions.
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