The new economics

Where the fuck did common sense go?

The current crisis in the world economies amuses me no end,although much less so when I think of the impact of this bout of stupidity on ordinary people. Firstly, we have a crisis brought about by a combination of poor oversight and corporate irresponsibility in a country where corporate freedom is an eternal rallying cry. Secondly, we have a series of costly bailouts to the very same companies that were allowed to put fire to the tinder of the world financial system. And now we some of the affected countries declaring a premature victory over financial disorder. I ask myself, when did these people forget basic economics? Where did they lose their common sense? The world financial system, it seems, is doomed to forever fail to learn from its own mistakes.

It has been known since the great depression (if not sooner), that a long-term depression is characterised by sharp swings in the economy in addition to a simple drop in growth. To declare that the fight is won and that no more needs to be done is simply idiotic when the chances are that you’re simply in the rising phase of an unstable system.

Similarly, its stupid to clamp down on trade (as most countries are now in the process of doing) when it is well known that this just worsens the global economic situation. Its stupid to even give CEOs (who get paid on share prices) the option of making obscene amounts of money for their companies in the short term while wrecking the economy in the long term. Its stupid to simply try to restart spending when the central cause of the crash has absolutely nothing to do with consumer confidence. Its stupid to try to move the world economy back to its pre-depression state when the whole problem was that that state was unsustainable.

There are fundamental problems with the world economic system in terms of skewed trade (cough-abusive import tariffs and protected markets-cough), skewed finances, a skewed debt system (the old problem of China holding onto most of America’s debt simply so that America can continue to buy goods from China). Everybody knows this. Nobody has mentioned any plans to deal with it.

So why is nobody doing anything about it?

My guess is that, because nobody ever plans for the long term (because all of our incentives are short-term), none of these problems will be solved. Politicians, elected in five-year cycles with the help of large-money support, have no incentive to solve the sytemic problems in their own country, let alone the world. Business leaders, who are paid to provide short-term growth to their companies, aren’t interested. Average citizens are too busy coping with their own problems. In short, the system will remain broken and will never be fixed.

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