Friday, October 03, 2008

The solution to the credit crisis

Plenty of economists can brag that they saw our current financial crisis coming, but how many can say that they saw it coming in 2002 and proposed a solution at the time? Dsquared can.

In 2002 people were still worried about the bust of the dotcom stocks that had boomed in the 90s. D^2 realized that Alan Greenspan had the solution:
Basically, the solution's pretty simple and it involves screwing interest rates down to the floor until mortgage rates follow them down to Low Low Prices levels, and pointing out to the Great American Consumer that it's "Bye-Bye, Magic Stock Market Bubble Money!" but "Hello, Magic Housing Market Bubble Money!". Marvellous.
Now you might think that D^2 is here mocking Greenspan, and anticipating the current bubble bursting, but you would be wrong. D^2 sees how to take Greenspan's genius to the next level.
The problem with those curmudgeons who rant on about the "unsustainability" of asset market bubbles is that they're just not imaginative enough in thinking about what might count as an asset. So house prices might crash? So what, if 1977 Chevvy Blazers start selling for $25,000 a wheel, half of middle America will suddenly feel rich rich rich. It wouldn't even be that difficult to trigger a "classic" second hand car bubble with the right mix of tax breaks to the auto loan industry (I'm even thinking about political feasibility here!). When that one runs out of steam, we can have a bubble in baseball memorabilia! Or parking spaces! Basically anything that Americans have lots of and might be prepared to pay over the odds for. Guns, probably (particularly as in this case, intervention in the market would redistribute wealth to urban blacks and rural whites, while leaving the Fed with an armoury that it's probably going to need unless the economy gets better).

The whole fucking Beanie Baby thing proved beyond doubt that Americans have no real qualms about being manipulated into ludicrously undignified speculative bubbles if they think they might be able to get out at the top. We ought to harness this tendency for good. I'm not saying that this is a solution for the long term, but if we reckon on five years per bubble, then cars, guns, baseball and Beanies ought to last long enough for me personally to be either retired to the sunshine with a stack of gold and canned goods, or converted to pure energy and living forever on the Internet. Depending on my market timing, of course.
The man has us pegged. To honor the fact that D^2 is a genius on par with Alan Greenspan, I think we should name him an honorary "Person who has fucked Ayn Rand"


Julian E said...

Doesn't the word "honorary" suggest that holding such a title would be an honor? I understand what you're going for -- he should be considered to have fucked Ayn Rand -- but I'm not sure if "honorary" is the right adjective. Then again, I'm not sure if there's a more fitting one.

Rob Helpy-Chalk said...

The whole post is an incoherent jumble of sincerity and irony. I sincerely admire Dsquared's economic insight and humor, and then joined in the humor in ironic praise of Rand and Greenspan.

Anonymous said...
This comment has been removed by a blog administrator.