(Updated: minor wordsmithing)
If you're ready for a change of pace from cloying Christmas stories, you might like Paul Krugman's talk that he gave at Google two weeks ago. If you're not quite ready to give up the holiday glow, maybe you'd like to bookmark it instead.
This isn't the standard pimp-my-book talk. Instead, it's an explanation of what we call, for shorthand's sake, the "subprime crisis." It's gloomy in parts, but you won't feel like the world is coming to an end (unless you've recently been foreclosed upon, in which case, it already has, of course.) The tone is less formal than a lecture, and Krugman does have a rare gift for making complicated financial ideas comprehensible, but there is still plenty of substance. Could've been heavier on the Bush-bashing, but that's my only complaint.
The talk is about 50 minutes long, with about 20 minutes of Q&A at the end. Highly recommended.
2 comments:
If you're looking for an informed, concerned and far more negative view on the sub-prime mortgage debacle, check here.
Don:
Thanks for the link, but I have to say, I didn't find Martenson's article to be particularly informative. In fact, it starts right off by being inconsistent: In the "Super Executive Summary," I read the housing market is going to bottom out; one paragraph later, in the executive summary, I read: "House prices need to decline in price by 30% to 50%, and they will."
I also greatly disliked the tone. By the third "Simple as that," I was rolling my eyes. By the fifth, I was wishing I could reach through my screen to give Martenson a smack. I may have an overdeveloped sensitivity in this regard, but I can't stand when someone harangues the audience as though he or she has the issue all figured out, and the rest of us are morons for not seeing the obvious. Nobody understands financial situations like this that completely. One of the reasons I liked Krugman's talk so much is that he is unafraid to be clear about the aspects of the situation that he, along with everybody else, can't predict.
Okay, I get that Martenson really, really doesn't want the government to launch a giant bailout program, especially if it is mostly for the benefit of the banks. I'm not holding against him the fact that he has an agenda to push. But, as with all True Believers -- whose own financial situations are doubtless secure -- this zealous faith in absolute free markets strikes me as naive. For one thing, it fails to consider the human costs resulting from letting out of balance situations fix themselves. It does not recognize how intertwined one sector of the economy is with the rest. It does not address the importance of psychology -- when things are going bad and the perception is that no one is doing anything to address the situation, the feeling of a rudderless ship can cause ripple effects can be magnified. Finally, it's always worth thinking about how a crash can be turned into a softer landing. Maybe the steps being taken now by the government aren't the best, or even good, but that does not mean that the solution is to do nothing at all.
I buy his main point: that the housing boom was a bubble, readjustments are required, some pain is inevitable, and it would be a mistake to expect that more government borrowing, all by itself, is going to mitigate all woes. However, I found his analysis simplistic and I don't agree with his prescription.
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