Why Slower Money Is the Key to a Real Economic Recovery
There’s a financial fault line that runs through the heart of our economy. Wall Street’s most recent rumblings—which saw the major indices take a dive in response to weak growth in China—are a stark reminder of the danger. If the stocks go tumbling in, so do our businesses, jobs, paychecks, and pensions. The tremors may have subsided for the moment, but if we’re to give the late financial seismologist Charles Kindleberger any credit, the next big one could be right around the corner.
What we really need is a comprehensive rebuild beyond the quake zone.
According to Kindleberger’s classic book Manias, Panics and Crashes, the market sees notable financial quakes or “panics” roughly every seven years or so. The frequency has increased recently, with significant panics occurring in 1989 (Savings and Loan crisis), 1992 (Britain’s Black Wednesday), 1997 (East Asian crisis), 1999 (Tech Bubble), and of course 2007-08. Whether the recent seven-year twitch turns out to be just a minor temblor or a foreshock to something much worse remains to be seen.
But one thing is for certain: If we don’t find a way to shift our increasingly financialized economy to stable ground, the next big crash is inevitable.
The Wall Street formula for disaster is simple: ever-greater money chasing ever-bigger bets with ever -faster payoffs on ever-riskier financial products equals crashes of seismic proportions. Greater, bigger, faster, riskier. It’s like a twisted Daft Punk song.
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