By Michael Baxter 18 Jan 2010 [1 Comment | 608 views]
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If you like Investment and Business News, you may be interested in the new book, Bubbles and Wisdom, co-written by the Investment and Business News editor, Michael Baxter.
Here is an extract.
Unless you have spent the last two or three years residing in a new housing development on the planet Mars, the chances are you know there has been something of a crisis lately.
No doubt you are sick of reading predictions of doom, of how the economy is going to hell in a basket. Maybe you think it is all exaggerated; a form of media hype that has created its own story. Or maybe you think we are experiencing another inevitable turn in the eternal cycle, and boom will follow bust, just as it always has.
It is just that reality is different. There is an even deeper crisis, far worse in its potential effects than the problems relating to banks and the availability of credit. Furthermore, we have never seen its like before. You can dip into the history books and see parallels relating to aspects of this crisis; but taken as a whole, the true underlying crisis is new, potentially horrific and could be decades in its unwinding.
Yet if you change your angle, and view things from a different perspective, a new shining light is revealed. Just as we face the very real prospect of a catastrophe that could bring us all to our knees, unprecedented opportunity also reveals itself. We could wake up from the nightmare of this crisis, and discover that is all it was; a bad dream, and reality is full of hope and promise.
Bear this in mind. There are a lot of economists out there. Did you know, if you were to put all the economic theories there are end to end, you would create a Great Wall visible from outer space – at least, that is how it feels. And when you have so many theories, and predictions and warnings, the law of statistics says that some of these predictions will prove right. That does not make the author of these accurate predictions some kind of latter-day Cassandra, any more than the one person in several million who wins the lottery is psychic. It is just random, and we are rather inclined to heap too much praise and eulogy on the person plucked out by the forces of randomness. If a thousand people search a haystack looking for a pin, do we say of the person who finds the pin that he or she is a blessed with a sixth sense? Of course not! Someone had to find it. Similarly, if someone correctly predicts some future event, that does not necessarily make this person a genius, or deserving of a Nobel prize.
So, in the build up to the credit crunch some warnings were proven right, but that does not necessarily mean the reasoning of the author of those warnings also was right.
Before recession descended on the UK in 2008, the economy had enjoyed its longest ever run of uninterrupted growth – 16 years in all. Figures go back for only a couple of hundred years, but it seems likely that as the UK’s economy historically was agrarian, and consequently dependent on the harvests, it has never enjoyed such a long run. Not since Julius Caesar first set foot on the beaches of England, not even since Homo Heidelbergensis – the people believed by scientists to be the ancestors of Neanderthals – first inhabited Boxgrove in Sussex, around half-a-million years ago.
And right up to the moment when crisis descended upon the world like a hammer from the devil’s workshop, economists were busy congratulating themselves. Savvy central bankers had beaten the economic cycle. The discipline of economics enjoyed its finest hour. Yet nine months later, their credibility was in tatters. Why was this?
And why is it that, for their guile, economists often forget to mention opportunity altogether?
It is often said that of the two characters which make up the Chinese word for crisis, when separated, one means danger, the other opportunity. This is rather apt because danger and opportunity are precisely what we face right now.
It is just that, as ever with these things, when you look closer it is not that simple. Controversy reigns over whether these two Chinese characters really do mean danger and opportunity, with at least one academic dismissing the claim as hogwash. This is not a book about the nuances of the Chinese language, but it is interesting to note you will often come across this saying about the Chinese word for crisis, although rarely will anyone point out the controversy. It seems that on occasions, something is just so good we ignore the complications. Such is the stuff that ignorance is made of. It is errors like that which can charge bubbles, create crises and can even lead to wars.
Now it is time to begin with an account of why we suffer danger, but at the same time enjoy such extraordinary opportunity.
For more details, go to www.bubblesandwisdom.com
Bubbles & wisdom is not what you’d expect from an economics book. Everyone has heard the expression “it’s a jungle out there”. Well this book takes it literally. The authors look at the story of economics through a Darwinian looking glass. The arguments are put forward in an entertaining and convincing manner, reaching a surprising conclusion. This involves plenty of contradicting received wisdom along the way. Most enjoyable are the snippets of information – a veritable feast of facts – scattered throughout the book. The authors’ enthusiasm for economics, evolution and history bubble through which along with a witty narrative make this a great read.