Wednesday, May 26, 2010

The Canned Goods School of Economics

An opinion columnist writing for Market Watch, a sister publication to Rupert Murdock’s right-wing Wall Street Journal confirmed that the rumors are true. The investment bankers are telling their big money clients to sell all their stocks, buy a farm in the country and stock up on plenty of canned goods. They are predicting that by the end of the year the Great Depression II will be in full swing, you won’t recognize the country and no matter who wins the election in the fall there is no fixing the system.

Paul Farrell who wrote the column and quotes investment bankers he knows from his trading days at Morgan Stanley has doctorates in psychology and law and writes on behavioral economics. He makes a perfectly logical argument that history is repeating itself yet again as it has over the last 800 years. Although I suspect he is a recent convert to the “canned goods” school of economics.

Behavioral economists have been warning ever since the Ayn Rand devotees at the Chicago School of Economics came into vogue under Reagan that the crash was coming. Their only misreading of the situation was under-estimating Alan Greenspan’s ability to create bubble after bubble sucking more and more wealth out of the middle class and making investment bankers like Paul Farrell rich.

It would be easy to assume that the only reason a Rupert Murdock publication would be telling such a “truth” would be sway the election in their favor but maybe they are simply trying to build some credibility with the villagers before they come to visit the castle with torches. “We didn’t create monster that destroyed your village, it was the other guys”.

Is a crash coming? Of course it is! Is it coming right now? Maybe… The credit spreads like the Libor are heating up again as they did in 08. Banking and corporate finance could freeze up again very quickly since nobody has any real confidence in the system. It wouldn’t be a good idea for Obama to go around saying “ the fundamentals of the economy are strong” like McCain did.

Obama’s contention that the Financial Reform bill is good legislation is about as dumb. FDR resisted calls to declare martial law and pushed reform instead but things move much faster now. You can’t wait to buy canned goods until the President declares an emergency.


RobertM said...

The oh-so-very-sad part of this is that it is all so damn unnecessary. I just got through reading "The Lost Science of Money" and Ellen Brown's excellent "Web of Debt". Both show how we could reform of our monetary system would put a stop to this. Here's a link to my latest letter to the editor.