Economics

Who's Weathering the Great Decession?

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Nouriel Roubini, the NYU economist whose mid-decade bearishness won him permanent status as one of the dozen or so Only People To See the Recession Coming, uses his "Doctor Doom" column in Forbes to single out countries that are doing relatively well in the Repression or Decession. The explanation for how these exotic lands avoided getting hurt doesn't offer much for deregulationists to like:

What do these countries have in common? One major theme is that they tended to have lower financial vulnerabilities due to more restrictive regulation and less developed financial markets, as well as larger and stronger domestic markets that sustained domestic demand. Moreover, they had the resources to engage in countercyclical fiscal and monetary policies, actions that were not possible in past crises. In contrast, countries that borrowed heavily to finance domestic consumption in the days of easy money are now facing sharp economic contractions. Despite the relative strength of these countries, however, their ability to return to sustained growth will depend on structural reforms that support consumption.

Hmm, sounds like the situation presents challenges as well as opportunities. Having less developed financial markets does reduce your financial vulnerabilities, just as being blind means you don't have to worry about nearsightedness. And sure enough, in the winners circle we find (along with some strong economies) quite a few countries where the permanent rate of unemployment is higher than the U.S. rate of unemployment right now.

Here's the pantheon: Brazil, Peru, Australia, China, India, The Philippines, Indonesia, Poland, Norway, France, Canada, Egypt, Qatar, and Lebanon.

All perfectly charming places, I'm sure. But the problem with these kind of high-orbital views of global affairs is that they're so general as to be pretty pointless. Does it really tell you anything that remittances from overseas Filipino laborers have been "surprisingly resilient despite the global economic slowdown?" Or rather, it tells you something you already knew about the Philippines (that it continues to be a poor country whose citizens continue to seek opportunities elsewhere), but it doesn't tell you what countries Filipinos are going to where they can still earn enough to send money home—which seems like the important point.

Still, this kind of skylarking is catnip for some folks. If it is for you, read the whole article and you can say you understand this crazy, hill of beans world.

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  1. Support me! To hell with production!

  2. all hail King Consumption!

  3. I’m not against regulation per se, but having worked in the financial services industry, i have no doubt that corruption and conflicts of interest between enforcement and big business are the problems – they prevent good faith, full and valid enforcement of the regulations we already have. As long as the SEC, FINRA, etc are run by the big firms, they will use the regulations as a bar to market entry for smaller firms. Only smaller firms get charged with significant violations of the securities regulations. Yeah someone at a big firm will get a small fine now and then, but if the SEC is going to seriously go after someone, even for something it concedes all companies are doing, it will be against a small firm.

    Since the big companies will never willingly give up power, and since everyone has a vested interest in maintaining the conflicts of interest that already exist, nothing will ever change, and it’s only a matter of time before America’s financial system completely collapses. I give it 2 years, tops.

  4. Wait, you’re saying an ivory tower intellectualoid is disconnected from everyday realities?

    Wow.

  5. Wow, excellent points indeed!

    RT
    http://www.anon-web-tools.net.tc

  6. If you really control your economy you can keep from having deep downturns. I don’t think the old Soviet Union had many economic downturns other than self inflicted ones when they decided to terrorize their people more than usual. But, the flip side is you don’t grow very much either. Yes, the US has suffered some nasty recessions. In fact, in suffered worse recessions (the ones in the 1830s and in 1873 were horrible) when they had a freer economy. But, they also have booms to. And ended up a hell of a lot better off than any place else.

  7. In fact, in suffered worse recessions (the ones in the 1830s and in 1873 were horrible) when they had a freer economy. But, they also have booms to. And ended up a hell of a lot better off than any place else. –

    unfortunately the boomers and the gimme tards are willing to sell their souls, freedom, and the future of the country in order to stave it off.

    years of borrowing, printing, spending, and consumption with too little production are behind us and the bill is coming due.

    they just want to sit at the table a little while longer and let the coming generations pay.

  8. As Russ Roberts over at EconTalk podcast likes to say often, a lot of what passes for Economics is ex post facto storytelling.

  9. Perhaps the only one in the list to be a good example of a country structured like, and tied economically to, the US, and that perfectly weathered the financial crisis, would be Canada. Yet if you Google it, you’ll find that since a very long time Canada’s financial system has been given as an example of a LIGHTLY regulated system. Yes, I know it is counter-intuitive, but it may be that Canada’s financial institution are less regulated than those of the US.

  10. When you’re dick broke and can carry everything you own, the world financial markets crashing just moves more people to your level. You really can’t slide any farther down the scale.

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