Seeing Through Data

Yesterday I woke up with the flu.  Somehow I managed to sit at home and work but I felt worse almost every hour of the day that went by, to the point where even taking a short phone call towards the end of the day seemed onerous.

As luck would have it yesterday was an especially busy day.

This morning I woke up feeling much better though realized that, in many ways, the problems we’ve been seeing over the past years in the economy aren’t so different than an illness.

There’s nothing odd about a business cycle overheating then cooling.  Indeed; exactly the opposite is true.  Our country has become too dependent on bubble economics: first the dot-com boom, then the real-estate boom, and now we’re arguably seeing another rapid buildup in the tech market.

Bubbles are, in many ways, an especially American economic trait.  Earlier settlers who came here, those that weren’t thrown out of Europe, often came in search of riches and those riches often came in the various bubbles throughout history.

This one has had an especially brutal ending.

In much the same way that I woke up today feeling a lot better maybe our economy is finally beginning to do the same.  Politicians will probably argue that it’s one party or the other that’s responsible, but it’s more likely the invisible hand that ultimately guides us that bears the most responsibility.

Lenders, borrowers, and everybody else is tired of living in a period of economic malaise. American’s quickly tire of being tired.

That doesn’t mean everything will cure overnight but, maybe, we’ve finally gotten to a point where we can put a real floor and can begin to rebuild.

I’ve always believed strongly that, except for obvious areas like monopolies, the free market has a way of regulating itself better than any regulator possibly could.

Pundits argue that the housing bubble was the result of a lack of regulation. I disagree.  In fact the system would have theoretically worked: the banks would have all burnt-down but-for government intervention.  Notes would have been sold for pennies to vulture investors who would have purchased and renegotiated them.

We take for granted that would have resulted in enormous economic pain, but the truth is we don’t know because it’s never happened.  Banks burnt-down in 1929 causing the Great Depression but, for the early and critical stages, there wasn’t FDIC insurance to protect the middle-class.

Normally hindsight clarifies the right decision but, in this case, it can’t because the stakes were so high that we couldn’t gamble with the future of the country.

Over the past few years we know Wall Street did a lot better than Main Street.  Many American’s  lost their homes and remain unemployed or underemployed.

Many of those lost homes came about due to fraudulent practices; faked paperwork, lawyers that deserve to be disbarred, and overtly rigged hearings.  Legal historians, no matter what their political view, are likely to look upon this period as fondly as McCarthyism. It doesn’t matter that they would have lost in anyway: our courts were never supposed to work like that.

I’m going to make this a short post because I missed a whole day yesterday.  But I’m healing.  I still feel lousy, but a lot better than yesterday.  I’m guessing that I’ll feel a lot better tomorrow.  So, I suspect, will the US economy if we continue to follow our current trajectory.