To some degree the current financial crisis seems to have resulted from a world of Warner Brothers cartoon coyotes suddenly looking down and noticing they’d run themselves off a cliff. Things didn’t get bad until we started noticing they were bad.
But I’m not sure everyone noticed at the same time. Almost a year ago I noted that the English newspapers I was reading were full of doom and gloom about the economy. But in the US, there remained a pervasive optimism. Naturally some of that could be due to the kind of naive obtuseness our foreign friends often accuse us of. And the election helped too, energizing us in a way we hadn’t been in years. But I think a lot of that optimism was rooted in something real, something that needs to cultivated and nurtured in order to nurse us back to economic health.
Even after bank insolvencies, market turmoil, and worldwide government scrambles to right the global economy, there remained a sense of normalcy in ordinary society. People who had jobs went to them. People who had friends still saw them. People who had families still loved them. There’s an obstinate inertia in normalcy, and it’s not going to be given up by normal people lightly. Especially when the problems around them seem so far from their own making. Most people are not bankers or finance experts. While many may have stocks in retirement accounts, the markets exist in a world apart from most people’s daily lives.
And yet they will be affected if they fail, even though that failure would be through no fault of their own. As the financiers panic and blanche and pull capital, even the healthiest companies will struggle as they lose either their capitalization or their customers, or both. If enough of these dominoes fall, everyone falls.
It is this very dynamic in fact which is at the root of the current crisis. For too long too much of the financial health of the world has been in the hands of too few people. To recover from the crisis, and to ensure that it never happens again, we must ensure that this schism is erased.