Orthodox Economy is an Oxymoron
I have very seldom display my thoughts outside the social media / web / marketing world lately. The sheer amount of stupidity that I have been reading lately has called for an intervention.
image credit: scriptingnews @ flickr
The world is in recession. Forget about being politically correct and trying to avoid panic by not using terms that sound "so very negative" about the economic situation. Things are screwed, not looking good and policy makers are as lost as they usually are.
I had a professor that once stated: "Economists are the only professionals who see their theories being grounded on a daily basis and still abide to their discourse". The concept proves to be right now more than ever.
According to wikitionary Orthodox means:
Adhering to whatever is traditional, customary or generally accepted.
Well, if economy was written in stone "Orthodox Economy" would make some sense as a general concept, but people would hardly make any money. But that's not the case.
Economy, as a general (and almost abstract) entity is always changing. People and companies find new ways to make and loose money on a daily basis. Markets adapt, laws change, conditions get altered. Prices rise and fall. It is a living and breathing animal.
This does not mean that crisis such as the one that's currently underway can't be foreseen; but rather that what has proven to be traditional, customary or generally accepted in the past might not be so as the world evolves.
I expect that as readers go through the previous paragraph I'll make a statement for the bailout.
Wrong.
The proposed bailout is too little, too late. The usual band-aid on a broken leg stuff. It will (if passed this Thursday) create little relief on the very short term and a big problem in the medium to long term.
Something must be done in the short term. Trust must be restored, credit must flow again. "Bailing Out" does not restore trust. Or would you trust the plane you just bailed out off?
A money injection into the financial system is just a minor thing, 700 billion can be sucked up almost overnight. But what's required is not a rescue, but a reform. Life without credit is not a nice thing, trust me. (Over Argentina mortgages have ~24% interest rates)
Over my 29 years I have witnessed 3 serious economic crises. To be honest I only have recollection of the last 2. The last time the banking system was so screwed up that the infamous "corralito" was imposed over all of us. People could not withdraw more than X amount of money per month. Things went down the drain, we had devaluation and now we live with inflation.
Things here weren't solved, just fixed enough to get going and sooner or later Argentina will be facing another economic crisis.
Final word is: timing for this crisis couldn't be worst. No politic wants to put out his head for chopping with less than a month left until the general election. But I'm afraid some serious and not-so-popular decision making must happen. And it can't wait 29 days, much less until Inauguration Day. Hopefully real leadership will surface as it has done in the past.