Thursday, August 13, 2009

Market worship

Here's Matt Yglesias being annoying through Paul Krugman.
Since the crisis, people who always thought strong claims about efficient financial markets were wrong have been feeling vindicated. But I don’t see much evidence of anyone having changed their minds. Nor have the big banks lost any clout on the Hill. Nothing really seems changed. To an extent, I suppose this is a consequence of the fact that Bernanke and Geithner succeeded in avoiding the total collapse of the world economy. Maybe we’re doomed to an escalating series of crashes—’87 stock crash, LTCM collapse, tech bubble, Panic of 2008—until something happens that the lenders of last resort can’t save us.
The annoying thing is that many pro-market people have always known about crashes and expected another one sometime. Few people may have predicted things playing out in the way they did, but it still fits in with the general pattern.

I didn't realise that we were crediting Bernanke and Geithner with preventing a "total collapse of the world economy". Wow. I really think people should go easy on this kind of imagery. Maybe by collapse they mean something like world GDP shrinking by 10%, and that would be terrible, but that's not what it makes people think of and he knows that. True collapse would involve something like nuclear weapons destroying most of the world.

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