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| Lileks: Markets Plunging! |
| 2008-01-22 |
| I don’t look forward to today. Plunging markets, trading brakes, B roll footage of traders shouting on the floor of the Stock Exchange, top-of-the-hour radio news with the newsreaders using their Important Concern inflection because God forbid the story should speak for itself. Then tomorrow there will be an editorial cartoon that has someone selling apples. Panic. Stupid, useless snowballing hysteria. I’m not worried about the economy at this point; I’m worried what people will do save it. Rebates! Oh, that’s grand. Nothing restores fundamental consumer confidence like shoving money in their hands and yelling SPEND IT! SPEND IT NOW! ON ANYTHING! THROW PILLOWS! STEEPLY DISCOUNTED HD-DVD PLAYERS! BLOWN-GLASS GEEGAWS! TRAILER HITCHES! BUCKETS OF PICKLES! IT DOESN’T MATTER! Or you could tax everyone more so they feel poorer, so they spend less, then wonder why retail sales are down, commercial property is soft, and business tax receipts have cratered. Just leave it all alone, please. It’s like a cold. You can put it off and cover it up but you’re going to have three miserable shuddering days of congestion and hacking no matter what you do. Unless you take zinc, of course. That’s it! Spray the markets with zinc! I’m not an economist, but I’ve noted something interesting. Since we decided that ethanol would be the cure to our “addiction to oil,” we managed to bump up the cost of corn, encourage a shift to corn production, and raise the price of foodstuffs. Which fueled inflation fears. Now that we have increased inflation, we have a fear of a recession, which drives the price of oil down, since demand is expected to slump. The price of gas has gone down a quarter in the last ten days, and it’s idling in the low $2.8x range. As others have noted, the cure for $100 barrel oil is $100 barrel oil. It all works out. There’s a boom and then there’s a bust. Having lived through a few, it’s annoying to hear the same fargin’ end-of-the-world hairshirt orations, especially from those who have spent their entire lives walking around with a bucket of black paint and a brush looking for good news to deface. While looking through some old papers I was reading about the recession fears of 1948. There were ads in the paper telling people not to turn the thermostat up in January because there wasn’t enough heating oil. There was also a steel crisis, which worried analysts. Imagine anyone worrying about a steel crisis today. In any case, The Republic struggled through and came out the other side. Now? We’re not even in a recession, but you’d think the morning sun was about to be blotted out by the rain of money managers hurling themselves out windows. Of course the news is bad. The news is always bad. Even the good news is bad, eventually. If they cured cancer tomorrow it would take a day before analysts worried about the impact on Medicare, what with people living so damned long and all. I think markets are inevitably rational, but it’s odd how the eventual rational judgments seem comprised of a million individual irrational freakouts. |
| Posted by:Mike |
| #2 I am avoiding the news today, and even felt guilty clicking on this link. Fortunately it was the the sound of good old Dr Lileks snapping latex glove of reality, convincing me it is "more better" to bend over than to not. I will just bite my fist, and repeat the words "It will be OK" in the voice of Ben Stein until this passes. |
| Posted by: Capsu78 2008-01-22 10:30 |
| #1 While looking through some old papers I was reading about the recession fears of 1948. Cause you know fear and loathing sell. The art of 'journalism' is so pathetic that it can not sell good news. That takes real work and skill. So the dead tree industry and the entertainment broadcast industry keep the advertising subsidies flowing in by scaring people. We've been through how many recessions since then? Look at the holdings and life expectancy of the average citizen in 1948 and today. Who's better off? Look life is chaos with some control. With a reasonable degree of control but with a marked degree of chaos you get progress. You understand adaptation to environment. The more successful the adaptation, the more there is of it. Things improve over the long run, though some pay the price in the short term as the system adapts, improvises, and overcomes shifts in the economy and society. There is a point when in trying to control the vagaries of life you place too many controls in place to dampen the chaos, you introduce entropy. You undermine the adaptation process trying to preserve the past, a statis, a status quo. That in turn creates stagnation and eventual decay destroying the entire environment for the vast majority of people. The key is to be able to ride the chaos without choking it. |
| Posted by: Procopius2k 2008-01-22 08:43 |