Thursday, December 18, 2008

Omelettes and markets

Yesterday all the procrastination came to an end as I finished my article in one long afternoon rush at St Kilda Public Library. Afterwards I went to the gym with that bittersweet feeling of being done, at least for now. Will present the text in New York and then prepare it for submission in early March, primarily by cutting back on the fuming rhetoric and adding more scientific references (maybe by rephrasing my argument as one of uncertainty and fat-tails).

Celebrating with some Aussie brekky: chorizo omelette with rocket on toast. Maybe it is good for my cholesterol levels that I do leave in six days. At the table next to me, two backpacker guys talking in some mysterious language, it sounds like a mixture of Swiss-German and Dutch, very confusing.
On a different note I have been thinking about to what extent the present economic crisis can be explained by the long period of high-growth that preceded it. The argument would be that, as monetary policy has been so successful over the last decade, it has helped creating a feeling that markets only could go up. As central banks became better on anticipating downturns and quickly countering them with lower interest rates, investors felt safe to take on ever more debt. Combined with what seemed to be an endless Chinese appetite for US treasury bonds (the other side of the massive US trade deficit) the world economy could keep building up larger and larger imbalances. Perhaps it is in economics as in the Sequoia forests of California, better to have small fires now and then than having devastating crown-fires every fifty years?



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