History - We're Doomed Because We're Repeating It
Thursday November 27, 2008
A reader disagrees with the premise of Why the Current Economic Weakness May Be Overstated by stating:
Irrational exuberance is real. So is herd behavior. When we see both working in tandem, we get a great deal of unsustainable behavior - a bubble.
But there is no reason to believe that these cannot work on the negative side. Irrational discouragement, if you will. Periods where we see a great deal of irrational behavior on the negative side, which causes downturns to be far more severe than necessary.
People who cry depression or tell us that we're all going to be living in Hoovervilles are part of the problem, no matter how good their intentions are.
Your idea that if no one is told the economy is bad then they won't figure it out when they see their neighbors living in the street and eating out of garbage cans is naive to say the least. Reality always wins in the end everywhere except in Hollywood.Anyone who believes that perception does not deviate from reality for extended periods of time must have been spending the last decade in a cave. Remember Dow 36,000? Remember people buying real estate they could not afford, but it was okay because 'real estate prices never go down'?
Irrational exuberance is real. So is herd behavior. When we see both working in tandem, we get a great deal of unsustainable behavior - a bubble.
But there is no reason to believe that these cannot work on the negative side. Irrational discouragement, if you will. Periods where we see a great deal of irrational behavior on the negative side, which causes downturns to be far more severe than necessary.
People who cry depression or tell us that we're all going to be living in Hoovervilles are part of the problem, no matter how good their intentions are.
Comments
Doesn’t anyone wonder why the Media didn’t publish much if any critical exposes of the underpinnings of the real estate bubble? Are the media elite not educated in the history of economic booms and busts? How much coverage did CNBC and Bloomberg TV give contrarian economists such as Nouriel Roubini during the subprime bubble? Was the media in the same game along with the Wallstreet, feeding the world’s herd mentality, or were they blissfully ignore, or perhaps there is a tacit media taboo covering exposes of American-led, unsustainable bubbles? Even the publicly funded, allegedly uncensored “free speech” radio media was devoid of covering the unfolding financial crisis until it had a full-blown contagion hold on the world. Eager minds want to know - why is the world watchdog, the media, asleep at the wheel?
Your references to Dow 36000 and the real estate bubble support the contention that fantasy NEVER lasts and in fact, when it exists it indicates that disaster waits around the corner. Sayng the economy isn’t that bad when it obviously is in trouble to even the casual observer does not prevent it from being bad. It just means reality isn’t being faced. This is always a recipe for disaster.
In case you haven’t noticed one program after another that has been iniciated by the Federal Reserve and the Treasury that was supposed to solve the credit crisis has failed - usually within weeks. And you claim that things may not be that bad with the economy? My feeling is the public isn’t buying this B*** S*** anymore and I suggest you stop shoveling it if you wish to maintain any credibility.
It would be nice if people would stop refering to the news media as if they were a causal factor in anything. The media is and always will be driven by the market economics of their subscribers. The media does not cause people to think one thing or another. The beliefs and ideas other subscribers causes the news media to exist and present the the ideas.
The news media is simply a window into the minds of the people that watch or read it. The reason that the news media didn’t “publish much if any critical exposes of the underpinnings of the real estate bubble” is simply because the public didn’t consider there to be any bubble.
This is a simple thing to understand. Readers cause the news media. It is not the news media that causes readers. Readership wants to read about the incredible return on real estate investment so the news media finds news to support the belief in incredible returns on real estate invesment.
An old adage is “You can’t believe everything you read”. Rather, it should be, “Everthing you read IS what you believe.”