John McLeod

Not Buying This Rally

I think it was for over a year I was posting sidebar links with "this isn't going to end well" comments to UK stories promoting getting onto the "property ladder" via speculation in Bulgarian condos. However, that carnage was trivial in comparison to what's going down when this historic C-leak rally turns.

Oh well, the tastiest coffee beans are harvested from the slopes of the volcano in the hours before it explodes. Party on, guys!

Misunderstanding the Great Recession

It is clear now that the present crisis was caused by hedonic shock resulting from a disruptive cornucopia. That is, East Asia sented sending Europe and North America massive amounts of cheap cars and manufactured goods, clothes, etc. I think it was pre-Xmas 2006 when LA & Long Beach were backed up 6-weeks deep in Bratz dolls and radio controlled cars. This destroyed the competing domestic suppliers, but caused consumers to (temporarily) feel about twice as wealthy and confident. Thus banks-gone-wild, the re-fi boom and so on.

As Professor Scott Nelson of William & Mary recently pointed out in the Chronicle of Higher Education, of all places, exactly the same thing happened in the run-up to the Crisis of 1873. Then it was American grains and manufactured goods flooding Western Europe. First the economies of their traditional bread basket (Russia & Ukraine) collapsed, while at the same time financial innovation and hedonic shock caused exuberant consumerism and a monumental building boom (that's where all those touristy piles in Vienna, Berlin, Paris and so on came from). It took about 6 years to clear.