Getting The Obvious Out Of The Way

Nate Silver takes on an article by Rupert Murdoch's Wall Street Journal. In it, Harvard economist Robert Barro writes about the relationship between stock market crashes and depressions. Barro thinks we're heading to a major depression. While finding his article incurious and simplistic, Nate also notes a troubling trend:

"the Journal is engaged in an ongoing project to use the stock market as proxy for the performance of the economy as a whole, and by extension, the performance of the Obama administration."

CNBC does the same thing. Deep analysis? They are cheerleaders. All these brain boxes had little useful insight and failed to predict the current recession, yet now they know how to get us out? The article's main flaw was it looked at previous financial situations and historic dates and did not really correlate enough to draw a serious conclusion. Add to that, we now have a new culture of CNBC and hedge funs and short selling that we never had before. The market does not know how to take care of itself anymore.

"The failure of markets to price assets efficiently is arguably one of the principal causes of the current economic crisis."

What Barro has done over the years at Harvard as a right wing economist, helping shape economic theory, is what brought us here. Now he gets to be a mouthpiece for Murdoch's rag to undermine Obama. Their strategy will be to claim that, if the treatment is not instantly effective, the physician must have caused the disease. [I love how all these guys want Government out of the markets, then when they cause they markets to fail, they want the government to come in exactly the way they deem necessary and then complain when it's not perfect for them in 6 weeks.]

John Kenneth Galbraith's "The Great Crash of 1929" held that the "boom" period before a crash encourages very poor economic decisions that must all eventually be paid for when the reckoning comes. By that, the stock market reacts and lags.

We are paying for poor Bush Administration decisions that let markets run themselves, backed with a Fed that made money very easy to borrow. All run by the smart guys and the banks, with all the risk insured. Seems too unbelievable.

Well watch this video and see how smart these guys are: [and I like Kramer]



Let's all be realistic about where we are coming from and where we are heading. We have change and it's going to be around for a long time. We obviously need it.

Source: 538.com