View from the Saddle

The Cowboy has a fondness for perspective – in this case historical perspective.  A broad view is a crucial tool in understanding….well anything really.  And for the economist, even a devoted armchair economist like the Cowboy, two primary ways of achieving that perspective are history and geography.  In examining our current global economic crisis, it is rather likely that we will not repeat a prior economic crisis, but analyses of prior tumult are useful in understanding what is happening, how long it will last, and how it will end.

The Cowboy has much to say about the crisis, but this morning the Cowboy is pausing on the trail (overlooking a broad, high-desert valley in the crystalline light of late morning in February – light that brings this vast landscape and azure sky into stark relief, or one might even say, perspective) to ponder a bit on the lessons of history.


Today’s Nobel laureate is brought to you by the letter K, as in Krugman.  I enjoyed his column today because he tried to give us an idea of where we stand in the eyes of history.

Money quote:

“To appreciate the problem, you need to know that this isn’t your father’s recession. It’s your grandfather’s, or maybe even (as I’ll explain) your great-great-grandfather’s.”

Krugman convincingly likens today’s situation to both the Great Depression and the Panic of 1873 in the U.S.  The Cowboy, for one, thinks that these are apt comparisons, along with the “Lost Decade” in Japan and Argentina of 1999-2002 among others.

So where does this leave us?  As our Special K says,”Who’ll stop the pain?”  Well, it seems to me that one thing that has changed is velocity, in all senses of the word.  The Cowboy has not seen a thorough and recent analysis of aggregate velocity, as an economist would define it, but my guess is that it has increased dramatically since each of the aforementioned crises.  What about lifestyle, technology, knowledge?  Again, without the data to back up this claim, (the Cowboy does travel light after all) it seems that velocity has increased in these areas too, even taking into account the tremendous changes of the Industrial Revolution, railroads, automobilies and airplanes.  The sheer increase in the number of people in the world who can communicate with each other, have 12 or more years of education, and have a sense of their place in the universe is itself strong evidence to back up this claim of accelerated velocity.

So however grand and unsolvable these problems may seem – and the Cowboy is not one to underestimate the gravity of the situation – the Cowboy returns to the twin pillars of knowledge and technology to support his hopes.  With a view like this, how can you help NOT being optimistic.  Despite what messes we regularly get ourselves into, we humans also have a knack for getting ourselves out of trouble.  Don’t panic.  Keep your perspective.  We’ll stop the pain ourselves.  When your out on the trail, you don’t have any other choice.

Published in: on February 20, 2009 at 18:04  Comments Off on View from the Saddle  
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