Business, Economics, Economy, Macroeconomy, MBA, Thoughts

The tipping point of the crisis (are we there yet?)

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It’s easy to talk about something when it has already happened. The crisis seems so predictable now (it was predictable before as well if you browse to older posts). Now the trick is about spotting the tipping point. Have we already seen the worst or are we going into a depression this time?

If we all saw it coming, why didn’t we do anything about it? Why sometimes prospects seem so grim and then, suddenly, hope seems to be around the corner?

I’ve got a theory about the tipping point, or how we are going to turn this around. It’s related to what Keynes called the animal spirits, not those of the American natives, but of John Maynard Keynes. Those that sharpen the edges of the market, turning optimism into euphory sometimes, and dismaying in despair sometimes. They are moody and impulsive, and sometimes the distance between hope and fright is as thin as a hair for them.

But the animal spirits couldn’t do anything without bodies. Inadvertently, we lend them our bodies, energies and enthusiasm. They act through us, so we should know something about them. We should feel them about to act.

Let’s read around. Who are we blaming for the crisis? The govermnents mainly, some obscure financiers, some not so obscure cons, other countries, departing leaders, distant wars… in short, we look around and find somewhere else to look at.

But this couldn’t have happened without our acquiescence. This wouldn’t be here if we all had avoided some things that, looking backwards, feel like common sense to all of us now. We didn’t have a say, yes, but we all could have had.

And how is all this going to change? How are we going to turn it around?

I can’t answer that. I am writing about when. And the when is not here yet. Only when we look inward, think of what we should be doing to change it all, when we finish the blame game and we act on responsibility instead, only then, we will have touched the bottom.

Until then, our animal spirits will keep dragging us down…

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3 thoughts on “The tipping point of the crisis (are we there yet?)

  1. Matt says:

    Gabriel

    how right you are; without all the individual consumers trying to extend their mortgages as far as humanely possibly and whilst trying to buy everything that China produced I do not think we, especially in the UK, would be in the same mess.

    In some ways for us it seems like there has been a growth in individual greed and also a belief that the state will bail us out whenever something goes wrong. The UK government have already instituted a plan to help people with mortgage problems, even though many of these problems were caused by those individuals extending their credit to buy additional properties.

    As to the when, its not now. I do not believe that the banks have revealed the true measure of their problems and this will further affect the lack of confidence in the market. In addition I do not believe that the Keynsian approach to solving the crisis is the right way – we seem to think throwing money at the problem will fix it. There needs to be some intelligence at play and I do not see it from our leaders (let alone the financial leaders who have all gone into hiding).

    You are correct in your view that everyone needs to act but for that we need to see a change in mind of many – spend spend spend will not get as out of it – it just reminds me of the phrase “when you’re in a hole – stop digging”. I believe that one answer will be an acceptance of lower growth and the need for individuals to balalnce spending and saving.

  2. Thanks for the comment Matt. I really believe that change must be borne by us all, that this greed that you refer to can’t disappear overnight and that we will have to make atonement for it all, one way or another. As you say, it is important to find a way to fairly divide this weight as we are not all the same anyway.

    About the Keynesian approach I really believe is unavoidable now, as we know what had happened previously when this road was not taken, but by no means is a guarantee for success. It’s still a bad solution, in any case, but we have to cross fingers and hope for it to work anyway, because we don’t really have many options.

    Best regards 🙂 gabriel

  3. Pingback: I sense some hope… sorry not yet! (Pandora’s jar is still not completely open) « Gabriel’s scarcity rent - it’s management stupid!

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