The Long Thief in the Night

The ever-insightful Brad Delong expounds thusly and deserves to be reproduced at length, my response follows:

Our Twin Financial Puzzles: The Long Run May Come Like a Thief in the Night

The optimists--inside the administration and out--about the current financial situation have only one economic argument: long-term interest rates are relatively low, and are not pricing the dollar-collapse and the U.S.-interest-rates-spike scenarios as having any substantial probability at all....

The long run in which the dollar falls and U.S. long-term interest rates rise may come like a thief in the night as a very sudden shock. If it comes as a sudden shock rather than as a long, slow, gradual realization, it will come on that day when the gestalt of the players on Wall Street and elsewhere changes, and when they collectively regard holding dollars as the more risky rather than the less risky strategy in the short run, when they collectivley regard being long long-term U.S. Treasuries as the more risky rather than the less risky strategy in the short run. On that day the long run future will be, as football coach George Allen used to say, now.

When will that day come? Tomorrow? Next month? Next year? On January 21, 2009? A decade from now? We macroeconomists who believe in financial market equilibrium have, today, a certain similarity to Millenniarists: our models of when The Day will dawn are not much better than the models of those who base theirs on a rule that transforms HILLARY RODHAM CLINTON into the number 666.

Right-on Brad.

You've spurred me to an admittedly meagre poetic contribution to the debate, my last poem was 16 years ago:

The Long Thief in the Night #

Estate Tax writ large as Death Tax
Social Security painted as The Coming Crash
No need for Health Care or Medicare
War sans Galloway will prevent The Great Crash
It's Our Time!
Spend! Attack!
All hail them:
The Cook, the Thief, His Wife & Her Lover

The only question is who will have the starring roles in this straight-to-VHS B-Movie (DVDs aren't an option). Is Greenspan the cook? Ken Lay's role is obvious but between Dubya, Cheney and the faceless, but very serious, wonks who are re-writing regulations and policies everwhere, who will round out the cast?

Article Author: Koranteng

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