More articles on the crisis

Well, I just can’t get away from writing about the economic crisis, or at least reference people with decades of experience who have.  At this point, I am approaching exhausted frustration because of the dominance of will power and intellect residing in the financial class: our executive and legislative politicians hold a deficit, in varying amounts, of intelligence, fortitude, and courage.  They come across as afraid to upset the social order which has clearly upset (economically, politically, and emotionally) our nation’s health.  The politicians in the crisis seem to be exhibiting a mutation of Patty Hearst syndrome: while not quite sympathizing with their kidnappers, they are asking their kidnappers how to escape their lair.

I resisted the initial outcry against the Geithner, but this NY Times article about his social and business schedule while running the NY Fed has caused me to reevaluate my understanding of the man.  I still maintain that he is intelligent, but I fear that his interests have been captured by the oligarchs.  Nonetheless, I also think replacing him would be, at this moment, a mistake.

Mark Hulbert, writing in the NY Times, suggests that the Dow Jones Industrial Average did not require 25 years to recover after 1929.  His is an important piece because it reinforces the importance of understanding nominal versus relative change, but I do not completely accept his claim that the market reached its 1929 levels in 1936.  For example, he argues that had the DJIA not kicked out IBM in 1929, the results would have been much different; this is fair, but that argument basically argues for including high performing stocks in the DJIA.  If we continuously shuffled the DJIA to include only the 30 best-performing stocks, we’d hardly ever seen downturns.  More importantly, his analysis, and that of all analyses of this downturn I have read, exhibit some of the same ahistoricism that got us into this crisis: you cannot argue for the resiliency of equities based purely on the performance of the American stock market.  My second post focused on the Nikkei index and its collapse since the early 90s; if you invested in the Nikkei in 1990, you’d still be waiting to get your money back, and I doubt that this is the only example of poorly performing equities.  In other words, American exceptionalism has infiltrated our analysis of our stock market’s returns, and I have not seen a serious analysis of other developed equity markets which would substantiate the claims about the superiority of equity investments.