Can’t sleep.
So I open up my computer and there’s a new post from Felix Salmon, “When Morgan Stanley almost died,” saying that even in this “orgy of one-year-later reminiscing,” decision-makers still need vivid reminders “just how close the entire financial world came to collapse.”
No doubt. Canadians can’t forget it either — even though we’re better-off than the Americans… Macleans just ran an article explaining Why the recession is here to stay; the Globe & Mail asks, Is the recovery faltering?
Not just the topic but this experience reminds me of last year.
Every Sunday night from mid-September through October I’d find myself awake until dawn, reading about the latest mind-boggling news — I’m pretty sure it was Felix who usually wrote whatever it was that kept me up — and getting myself all anxious and excited, despite not having direct connections to the situation.
Here I am again. I mean, here we are — here still…
Out of nostalgic curiosity I browsed some of last year’s posts. On October 14, I quoted something from Paul Kedrosky that seems kind of funny now. He pointed out that while the fear of finance system collapse had been addressed, the fear of a global recession had not:
Having saved the credit system we are not going to return to the days of yore, with too many banks, too much leverage, and too much consumer debt.
Exactly.
But what’s funny now is that instead of too many banks now we’re worried about too big banks; instead of too much consumer debt there’s growing political turmoil over too much government debt.
The more things change the more they stay the same.
Meanwhile those circumstantial changes haven’t done much to change our cultural mindsets and attitudes. The end of recession was declared at the slightest whiff of GDP growth; voices over the airwaves are telling us it’s safe to come out of the shelters.
Nobody really believes it though. Everyone at least senses the effects of growing unemployment, for example, even if we aren’t personally affected — it’s just that people don’t really know exactly what to say or do.
We’ve learned not to trust the headlines but we have no idea what or who to trust instead.
We’ve been conditioned for years to think and act a certain way with money that’s different from earlier generations… Um sorry – I feel like this is turning into a David Brooks-like column, might as well just excerpt what he wrote last week:
Evidence of this shift in values is all around. Some of the signs are seemingly innocuous. States around the country began sponsoring lotteries: government-approved gambling that extracts its largest toll from the poor. Executives and hedge fund managers began bragging about compensation packages that would have been considered shameful a few decades before. Chain restaurants went into supersize mode, offering gigantic portions that would have been considered socially unacceptable to an earlier generation.
Other signs are bigger. As William Galston of the Brookings Institution has noted, in the three decades between 1950 and 1980, personal consumption was remarkably stable, amounting to about 62 percent of G.D.P. In the next three decades, it shot upward, reaching 70 percent of G.D.P. in 2008.
During this period, debt exploded. In 1960, Americans’ personal debt amounted to about 55 percent of national income. By 2007, Americans’ personal debt had surged to 133 percent of national income.
And it isn’t merely that we are conditioned; our whole economic situation in general is systematized to support and perpetuate what we’ve been doin. It isn’t just “evidence” (as Brooks says) that’s all around, we’re surrounded by cues and incentives to continue thinking and acting the same way.
We still have the same decision frameworks, the underlying information problem hasn’t been addressed.
Returning to what Felix Salmon was saying, “these crises can come out of nowhere, and it’s imperative that the next time round, we have institutions capable of dealing with them…”
No small task. It’s going to take a lot of learning and probably a considerable amount of fighting — but there’s really no way to know exactly what’s best from where we are now. We’ll have to work it out gradually.
Fortunately, while we’re plugging away at that, Andrew Ross Sorkin’s new book about Morgan Stanley looks like a great read.
