I am Irving Fisher

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7 Responses

  1. I’m also decades out, and I have to say I share your view. The weaker investments will be weeded out, and maybe the housing market will bottom out around the time I’m finally stable enough to get a mortgage and settle in any one place.

    That said, I’m still putting the lion’s share of this year’s retirement savings in foreign companies. I’ll not be the last rat off this ship if it comes to that.

  2. “I am also frankly skeptical about the notion that we are facing a crisis that will call for New Deal-esque responses.”

    …and since the original New Deal-esque responses were almost always wrong, I would say no crisis should call for such responses.

  3. dave hoffman says:

    Nate, I basically agree with you that the relationship between this particular crisis (the last 18 months, at any rate) and the underlying health of the economy is at best unclear. But I think the precautionary principle applies here, to a degree. There is a non-trivial chance of a serious economic downturn – asset deflation coupled with inflation for consumables. That doesn’t mean bailouts are the answer, and I very much share your concern that the regulatory responses are likely to be bad fits. But I’m not nearly as sanguine as you are, obviously.

    Do you think you will feel the same way if AIG goes bankrupt before the end of the month?

  4. Nate Oman says:

    Dave: I am not sure what to make the precautionary principle in this case, particularlly if it is going to be implimented by the same regulatory geniuses that created Sarbanes-Oxley.

    I may well continue to ride the gleefully-watching-the-mighty-humbled buzz if AIG goes under. I am less concerned about the systemic risk posed by bankruptcies than the systemic risk posed by moral hazard and regulatory over-reaction. Hence, if AIG goes under I may feel less sanguine precisely because its bankruptcy would create more pressure for misplaced government action. Of course, as I write this the Dow is down 500 points, so maybe I should get more scared.

    My reading of the economic history, however, is that the Great Depression was caused less by investments gone bad and investors jumping from windows than by a misguided contraction in money supply by the Fed. Likewise, the long slow slump of the Japanese economy was caused by a regulatory response geared toward saving investors from the short term pain of falling asset prices.

    I think that the question is whether investors run to the mattresses permanently if we let the Lehmans and (perhaps) AIGs of the world die, or if they have the bejesus scared out of them for a while and then come back. I’m betting on the later possiblity. The United States is a friggin’ huge economy and while we have slightly higher than normal unemployment and a couple of quarters of less than steller economic growth, I can’t help but thinking that there are a lot of opprotunities here for a lot of people to make a lot of money. So long as that basic economic reality holds true, then turmoil in financial markets doesn’t necessarily give me the long-term willies. Of course, I could be wrong. We’ll see. It is going to be quite the show.

    Pedagogically, however, the timing is perfect. I am teaching asset securitization this week in my commercial law class ;->

  5. Susan says:

    Okay. So you’re young. I want to retire next year. And?

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  7. loan says:

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