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September 19, 2008

What Economy?

Back in March, I pointed out that the housing crisis then being so vaguely described might be obscuring a national bankruptcy. Recent events: the demise of Lehman Brothers, the Freddy and Fannie bail out, an unprecedented federal loan to AIG, render that speculation less far-fetched. Even after those measures, the state of the economy was still worrisome enough on Thursday to push news of Hurricane Ike and the virtual destruction of Galveston from front pages and generate a meeting of shaken government leaders in DC.

After reading a few descriptions of how the sub prime mortgage mess had been created, I’ve come to realize that the rampant official dishonesty that had become intrinsic to the war on drugs has also become the standard for those charged with overseeing our economy. The principle difference seems to be that our drug policy stalwarts pay some attention to the criminal markets they oversee, whereas our financial regulators have remained oblivious to the ones they were permitting to develop.

Eight years of accelerated dishonesty and theft by the incumbent administration seem to have produced a perfect storm in which crises generated by their policies are popping up so rapidly in its last days that no one knows what the next will be: food riots? energy shortage? extreme weather? terrorist attack? or new market failure?

The major cause of that particular uncertainty here in the US is now obvious: few know how much they are worth for the simple reason that investor confidence in the stability of the world’s most critical markets has been shaken as never before, and we live in an interdependent world of almost seven billion people in which a larger fraction than ever depends on the global economy for sustenance.

It has to be pretty scary when a physician who never took Econ 101 can put his finger on the problem. Yesterday, it was suggested that global anxiety is having an increasing impact on human behavior.

Few developments could be more anxiogenic than a global economic melt-down. Osama bin Laden’s attack on the West seven years ago can now be seen as an almost perfectly timed invitation to suicide.

Doctor Tom

Posted by tjeffo at September 19, 2008 04:34 PM