Prof.H on Fluxlife
Cheney on the Economy: "No One Ever Saw it Coming."
Cheney couldn't have been more wrong about that.
The economic collapse that began in the last quarter of 2008 was entirely predictable, and was predicted more than two decades ago.
Let's revisit those predictions, as they were made during debates over Reagan's then-proposed economic theories: "This 'Reaganomics' idea is going to create an economy built like a house of cards. Something is going to shake it and cause it to collapse and collapse big - huge. We could be facing something worse than the Great Depression. There are many things that could trigger the collapse, but if nothing else does first, a sustained period of sharply rising oil prices are sure to."
This is exactly what happened through the first half of 2008. Oil prices rose and continued to rise, the economy shook, and collapsed like a house of cards. The first card to fall hardest and fastest, the housing market, fell first because that entire market was itself a house of cards built atop the house of cards of the overall economy. Many of those cards are still drifting down from their lofty heights, and will continue to do so for some time to come.
It's not that "no one ever saw it coming." It's that Cheney and everyone that he paid attention to didn't see it coming because they didn't understand, or didn't pay attention to, the fundamentals of the economy. The fundamentals of the economy are easily obscured by esoteric theories, but those fundamentals will always come back and wreck havoc if they are forgotten.
It isn't that Reagan was so terribly wrong. Indeed, the economy does "trickle down", as his economic theories proposed. What he did get wrong was how truly like a spring-fed watershed the economy is: it doesn't trickle down from a few vast deposits of wealth, like the seas and oceans; it trickles down from the many millions of the smallest, most remote, most inaccessible consumers, like the springs high above the headwaters of the smallest streams and brooks. Those smallest streams and brooks can be likened to small family and neighborhood businesses, and onward up the scale of businesses we go as we travel further downstream, and then downriver, through the watershed that any economy is.
In short, Reagan's error was that he got it backwards.
All Rights Reserved.
fluxlife technorati tag(s): economy - the economic collapse - Reaganomics - trickle down theory - oil prices - Dick Cheney - fluxlife |