The recession is over but the depression has just begun
We live in a complex maladaptive system and that policy makers would assume the worst was over too soon and fail to follow through on more substantive enduring measures of reform and economic healing. This is exactly what is occurring.
SHOOT: I believe that we already know what to expect from the future. We already know the consequences of our actions. Most people expect some sort of dire consequence.
We have had a long hot and dry spell. The forests are in a critical state where anything could tip us into a major forest fire. We could have 100 different forests across which there are minimal opportunities for the localized fires to jump. But, alas, we have one big interconnected forest with many fingers of instability. So, when the fire hits, it does major damage. Luckily, our firemen are able to douse the fire, which alleviates the pressure on the forest. But, this is only a patch. The fingers of instability remain – which is the real problem, of course. Then, another hot and dry spell hits. This time, however, the firemen’s solutions are ineffective.
Interest rates are at record lows worldwide. Our financial system cannot stand another shock – whether it be sovereign debt, double dip, commercial real estate or some other as yet undiscovered instability. My fear all along has been that policy makers were myopic and the system is maladaptive. Increasingly, my fears seem justified.