Tuesday, September 29, 2009

Rescuing the Rescuers

The economy is in recovery, the financial world has survived its greatest test since the 1930's, at least that's what all the pundits on most media outlets are proclaiming. I don't necessarily believe that history repeats itself, but I am suspicious of the sales pitch that we are getting right now (because there is still huge amounts of cash around the world sitting on the sidelines waiting for the second shoe to drop). In the Great Depression the first market crash was followed by a recovery of similar proportions to what has happened since March 2009. But government interventions in the 1930's prolonged that recovery resulting in World War II. We may now be in a similar situation. The market tinkerers especially in the United States will soon be required to unwind there positions without upsetting the applecart. All countries where market interventions were large will be doing the same thing, the trick is timing. Its hard to imagine the arrogance of these guys. Few of them foresaw the extent of the market crash in 2008, most "experts" predicted a short and shallow recession. Yet now, these same experts know exactly how to fix things and can predict the consequences of their actions. They are smarter than all the millions of investors around the world and everything will be fine. Yeah right!

In Canada, Prime Minister Harper issued a "stimulus report card" yesterday proclaiming that things are just hunky-dory and he's doing a wonderful job. Two recent articles in the Globe and Mail cast some doubt on the possibility that a recovery can be controlled. Preston Manning wonders how long it will take to recover from the stimulus, and Gwyn Morgan wonders why governments fail to learn from past mistakes. Free-market capitalism is not the cause of the financial crisis as Morgan points out, and has lately been popularized in a movie by Michael Moore. In fact, recent elections in Europe are not supporting socialist ideals as may be expected due to the Great Recession. Even in Canada polls show there is no rush to support the Liberals or NDP. Maybe people aren't fooled, maybe not. Are we out of the woods, or have we just come to a clearing in the forest? Time will tell.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.