Are you one of those people that shows up late for an event… only to discover you are a day early? I have done that more than once.
For me everything seems to take three years longer than I expected. The current economic crash is no exception, but by early 2008 I figured the government would prop up the economy at least until the elections were over, so my guess was that things would go down in October 2009 – especially since I was seeing significant similarities between Obama and Hoover (apparently I am not the only one to see the similarity). The crash came three years late and one year early. Oh well.
So what happened? How could I be so wrong?
First, this crash has been building for nearly 20 years. By the late nineties the economy desperately needed to slow down. Economies need breaks too you know. But, no one wanted it to slow-down and Greenspan “the great juggler” knew the secret to keep it going. Every time Mr. Market dropped another ball, Greenspan caught it and tossed it up in the air. Greenspan was invincible. He could juggle anything, and he kept the economy going years beyond what anyone thought was possible. After a while though, we started to take him for granted. He may not have even known how important he was.
Then Greenspan decided to retire. As smart as Greenspan was, I guess everyone assumed he would be able to pick a good successor, but skill in one area does not guaranty skill in other areas. As a matter of fact, people who are exceptionally strong in one area are typically weak in most other areas.
His choice for successor, Bob Bernanke, proved how qualified he was in his “helicopter speech”. When he was chosen, my jaw hit the floor. I knew at that point we were in big trouble. The mighty Casey had struck out. Greenspan’s legacy destroyed by one choice – the choice of a successor. I am not sure if Bernanke can juggle a normal three ball economy, but he sure wasn’t prepared for the time-bomb Greenspan handed him.
Bernanke and Bush have been putting this off as long as they could but then something happened. Maybe they just dropped a ball. No big surprise there. Clinton made a lot of mistakes, but he managed to come out smelling like roses thanks to Greenspan. Bush really didn’t do much either direction, he just let Greenspan do his job. By the time Bernanke stepped in he was handed two decades of neglect and mistakes. He was handed a time-bomb and all he knew how to do was detonate it early.
So it appears that Bernanke did the only thing he knew how to do. The timing seems really strange to me. I wonder though, if this might be a deliberate deflating of the economy. Here are a few reasons I think it might be:
- The crash decreased gas prices which is good for incumbants. Lost investments affect a lot fewer people than gas prices, since America is a debt-based society anyway.
- If McCain wins, getting the crash over now might make things easier for him.
- or… the Republicans might be deliberatly throwing the race since taking over an economy this bad is going to be political suicide.
I have not studied the political side of this enough to tell whether the early recession was deliberate or not. I am just saying from an economic viewpoint the timing seems really odd. I really am not that interested in American politics, but I am interested in economics.
The other possibility is this was not the real crash. There were some dips in 1928 and early 1929 also. Then everyone said, “Hey, I am glad we got that out of the way, and it was not too bad either.” Then they went on to blow the big bubble. I guess we will see next year (or three years after that).
All that to say that I am pretty good at figuring out what is going to happen but don’t bet on me being right about the timing.