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This text was submitted as an op-ed to the WSJ... As yet unpublished.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Sep 15th, 2008 at 07:08:23 AM EST
It's overtaken by events, but is still worth posting, as it predicted the crisis and explained what was the underlying ailment.

We're moved from the latent form of the disease (if the damage to the economy outside the financial sector can be ignored, as the official statistics have led to believe for too long) to its acute form, where the symptoms catch up with the financial sector and bring it down.

What needs to be underlined is that the supposed prosperity of the past couple decades was, to a large extent, virtual, and it is disappearing right in front of our eyes. And that destruction is part and parcel of the system that was promoted, and not an exogenous, unpredictable "once in a century" event as some (like Greenspan) claim.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Sep 15th, 2008 at 07:17:22 AM EST
[ Parent ]
What needs to be underlined is that the supposed prosperity of the past couple decades was, to a large extent, virtual, and it is disappearing right in front of our eyes.

It was worse than virtual, it was borrowed from the future by "monetizing" revenue streams. This means you have to earn your future income just to cover the hole.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Mon Sep 15th, 2008 at 07:19:25 AM EST
[ Parent ]
that it was worse than that, given that "real" activities suffered from under-investment during that period.

On the other hand, if we move back towards real activity (infrstructure and renewable energy come to mind, somehow), maybe the pain will not be so bad. The issue is about letting the wealth created be captured or not by the financial sector. If finance is brought down to size, maybe GDP will be lower, but overall activity may not be so much lower.

It's time for the real economy to default on the financial sector (rather than the other way round, as is happening now...)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Sep 15th, 2008 at 07:22:11 AM EST
[ Parent ]
It's time for the real economy to default on the financial sector (rather than the other way round, as is happening now...)

Right, see my parallel comment on nationalisation...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Mon Sep 15th, 2008 at 07:23:52 AM EST
[ Parent ]

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