Today, BoingBoing had a post titled "America's financial system was shaken to its core on Sunday".
When entertainment blogs (no matter how wonderful) are discussing a current financial catastrophe, you know things have gotten abnormally rough. How rough precisely?
Greenspan today characterized this as a "once-in-a-century" crisis.
One of BB's commenters recommends another unlikely source for hard, gloomy news:This American Life: #355: The Giant Pool of Money. Claims it's the best reporting on anything, let alone the subject at hand.
Why we should be pessimistic:
Greenspan's comment is pretty dire, and it comes from an expert on avoiding unnecessary fear.
His talk of a once in a century event reminds me of the way they rate flood walls. They rate flood walls as "50 year" or "100 year" or "500 years." The idea is not that there is, necessarily, one 500 year flood every 500 years, but that flooding occurs across a normal distribution.
The difficulty is that the extreme events on the tails of normal distributions are pretty abnormal. The extreme events are messy and random. Usain Bolt's records were years ahead of "wise" expectations. And when we talk of an extreme flood, or perhaps an extreme financial crisis, we might be talking about something that runs deeper than any possible projection. Some unlucky decade gets the real storm of the century, and some unlucky century gets the storm of the millennium.
Why we should be optimistic:
We have a cultural bias towards doomsaying, or "Chicken Little" wouldn't be a reference you immediately recognize. That alone should help us to take these predictions with a grain of salt.
We have very robust financial systems in place these days. Even if a thousand banks collapse tomorrow, we have a number of tools to make banking profitable today that would have been inconceivable a century ago. (Computers generally make professions with heavy accounting appear suddenly trivial, and computers have been advancing somewhat over the last century). Our increased understanding of these events arms against future long term catastrophe. But teeming educated populations insulate us from long term financial downturns in a way that perhaps has never been fully witnessed. More intelligent and educated people want to make enough to care for themselves or their families than ever before in history.
Maybe after 9/11 we saw some of that strength. One of the largest financial centers, a symbol of U.S. commerce, was destroyed. The markets became nervous. But it was business as usual in a month and a half. It was a blip.
Just imagine if U.S. society a little under a century ago was armed for a recovery from the Great Depression the way we are: with only 300 million intelligent and willing workers ready to pitch in, factories in every state that can produce millions of anything per minute, economists who have the benefit hindsight (actual data on economic downturns!)
Sure, the machinery might be winding down, as it does from time to time, but never before have so many hands been waiting to spin it back up.