There are maybe two people who have figured out the direction of our global economy. One is George Gilder, who wrote the groundbreaking “Wealth and Poverty” some thirty years ago, and has recently published his opus “Knowledge and Power”. His newest book will be the subject of a future post, once I’ve finished it. But I’ll tantalize you with his thesis that wealth is not measured in physical assets or even in currency, but solely in knowledge.
The other guru I follow is Nassim Nicholas Taleb, a truly iconoclastic thinker. You’ll want to read his trilogy on the nature of our dysfunctional economic order. The first book was “Fooled by Randomness”, which was followed by “The Black Swan” and most recently “Antifragile: Things that gain from Disorder”
Where to start? His targets are all over the place, ranging from the Federal Reserve Governors who are perpetually tinkering with the market in order to bail out our too big to fail governments and banks, all the way down to the soccer moms and their control over their children’s “play dates” who insulate their children from having any agency over their own lives.
And it’s not as if this should come as a complete shock to any of us. We got a preview of this philosophy early on when the forest service finally acknowledged the role of forest fires as being an essential element in forest ecology. When we worked to extinguish all forest fires as a matter of policy, we overlooked the important role that these fires played in clearing out vegetation that threatened the overall health of the forest.
Then, when massive fires such as the fire that devastated Yellowstone in the eighties raged uncontrolled, they were fueled in part by the lush vegetation that had not been allowed to be burned out over the course of naturally occurring fires.
I can’t think of a better metaphor for the national and global economies. Both the Euro zone countries and the U.S. are essentially following the Japanese Model adopted after the twin crash of the equity and real estate markets in Japan in 1989. The adaptive philosophy was to protect companies rather than protect competition. This was the birth of the Zombie Banks that were kept on life support despite their portfolio of non performing loans, and the walking dead of the corporations that would not be allowed the simple dignity of dying a natural death.
And what is there to show for it now that we are deep into the third decade of this “fragilista” policy? The Nikei average is just under 15,000, despite its flirting with a high of 40,000 at the peak of the bubble. It was once called the lost decade…but it’s been going on for 24 years…and still counting.
You’d think that this dismal performance would have scared the other market economies straight. To the contrary, this template of free money, financial repression on savers, and life support for moribund governments, companies and banks is now a global prescription for economic idiocy.
There’s so much more to Taleb’s book. Like how having your own personal physician is a threat to your personal health.
How do I know this guy is smart? Easy…his beliefs and prejudices so closely align with my own.