Why all the interest in and news alerts about equity market indices? Because the financial press is still Wall-St-centric, and Wall St is still all about equities. For sure, as markets are down 50-55% from October '07, lots of of folks are really hurting. I do not mean to minimize this pain, nor deny it's reality, but it really misses all the much larger points about this meltdown.
The largest one being that the world has changed very much for the worse, and old modes of thinking no longer apply. It is difficult to overstate this point, try as I might. What's changed?:
- America's financial system, and hence the world's. It's still in crisis mode folks, and shows zero signs of improving. The near-death heart attack of October has been replaced by congestive heart failure. Similar, just more drawn-out
- The Global flow of funds (see Dr Setser here)
- The presumed healthy balance between deficit nations and surplus nations. Was never healthy, and never balanced. The overdue realignment to something sustainable will take many years, be very painful, and need expert leadership. How/when China, in particular corrects its imbalances is crucial, and difficult to foresee.
- The 'miracle' of emerging markets and economies. Was based on over-abundant and too-cheap credit. Those days are over
- A trajectory towards ever-increasing wealth in most of the world over the past 20 years has been replaced by epic wealth destruction, with soon-to-emerge social unrest as a consequence, as my pal Derek points out
Soonish I plan to attempt to put this all in some sort of perspective. Stay tuned. For the time being, look not only at Wall St to assess the state of things economic. It's a big world out there...
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