Wednesday, April 15, 2009

Credit Crunch

Martin Wolfe, FT, discusses one Simon Johnson, of the “Sloan School.” The paragraph that follows is an excerpt from Wolfe’s column on-line:

" “In its depth and suddenness,” argues Prof Johnson, “the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets.” The similarity is evident: large inflows of foreign capital; torrid credit growth; excessive leverage; bubbles in asset prices, particularly property; and, finally, asset-price collapses and financial catastrophe. "

(JS) No doubt it is similar. Why would it work the same way? It works the same way because there is no one in charge, and the principle is that of capitalism itself, not some particular policy or doctrine like the doctrine of a national leader or national party. Rather it is a set of principles called “the market” or free trade or capitalism. The basic rules of the game are the rules of capitalism. What the principle is not is the ideology of the Republicans or the Democrats in the U. S. Now I didn't say that capitalism was good ...

And I do not recall saying either that all we need is to not intervene, or that all we need to do is listen to the farthest Right Republican around, or to the standard wisdom of the economics pundit industry. I didn't say any of that. Did I?

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