ultranomics

One thing is for sure, always expect the unexpected. For the past decade the buoyant global economy has been lulling us into a false sense of security. We started to actually believe that this time it was different. Forget the dotcom crash, real estate really could always go up in value. Heck you know what they say, “buy land, they’re not making any more of it” (personally we don’t consider Dubai’s new islands to be an exception! – see jq’s reference to Atlantis below) so with increasing populations, increasing economic migration, low unemployment etc etc how could the property market possibly crash. No, no, no – this time it really is different. That’s what most of the experts were saying.

But you know what we say, don’t you readers? Nature in the end gives you what you deserve – the Indians call it karma. Here’s the rub though – for all our technology, all our analytics, all our models, most of us never see that sucker punch coming! Or if we do see it its usually far too late. The American Subprime meltdown is of course the elephant that caught our great world leaders completely by surprise.

Now those same great leaders were found to be having a jolly back-patting get-together at our expense this weekend in Washington, where they convened the G20 summit. Did you see the pics? Mr Bush looked the most jolly of all – like the kid who made a mess in the nursery but was about to leave without having to tidy the toys back into the box.

George W. Bush at the G20 summit

Bush and the others, from both developed and developing nations promised to take “whatever further actions are necessary to stabilise the financial system” and vowed to “use fiscal measures to stimulate domestic demand to rapid effect, as appropriate to each particular country”. Whenever we hear the words, “Whatever necessary” and “use measures as appropriate” we get that feeling of being in a boat without a map. These are the guys who never noticed that elephant going berserk, who allowed our crops to be devoured and our shacks trampled in plain view of incompetent herders (the banks), who put all their trust in the zoo’s gatekeepers (the central banks) and who never bothered to understand what dangerous tricks the elephant trainers (the hedge funds and derivative dealers) were teaching to the elephant. Now these same world leaders expect us to believe that they know what they are doing and can handle the crisis that they let occur.

We will wait and see what their efforts will achieve. Yet we fear that for all the promises of co-operation and anti-protectionism policy objectives, for all the cash injections and new regulatory “colleges of supervisors”, the way this new Great Depression will play out will have precious little to do with what governments decide to implement. It will simply take its own course. The greedy will be cut down. The non competitive enterprises will be decimated. Jobs will be lost. The weak will perish. Those who didn’t save for the future will find that the future won’t save them. Those who thought that something for nothing was possible, will find their somethings have become nothing. Sure, a lot of innocents will be hurt along the way. The Great Depression will not care. Finally though, our economies and the world in general will emerge a healthier, more grounded place. New enterprises will take the place of the obsolete, and bring with them new jobs and new prosperity. Of course, our politicians will take credit for it all. Until the next Depression which probably won’t be in our lifetimes. That unfortunately means that as individuals our lessons learned may not be needed by us again, although those lessons may make us into boring penny pinching old folk. Perhaps our kids will listen to our advice – somehow though I don’t think so.