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Weak Financial Analysis is Why the U.S. is in this Mess: Response to James Pethokoukis article in U.S. News & World Report “Bailout Prevents Great Depression 2.0” 2008 September 24 © 2008, Libertiny Financial LLC
Jim Pethokoukis does an excellent job in his article demonstrating exactly why we're in this financial mess: So called financial and economic analysts (government, corporate, media) have gotten away with years of weak, quickly done analysis of complex financial issues. They’ve gotten away with it because the booming stock market, booming housing market, and lack of government policing have allowed most people to take their eye off of the underlying financial ball.
Just as Pethokoukis does some simple math in his article while guessing, at best, about the critical issues called "assumptions", he demonstrates why rushed, unstudied calculations typically open the door to erroneous results. It reminds me of the time when I was a first semester college student and proudly expressed the answer to a math calculation out to 16 decimal places. I rightfully earned an "F" because I had demonstrated absolutely no understanding of the underlying assumptions and my answer wasn't even in the ballpark--a lesson that I learned along with my entire class and one that former Chairman of the Federal Reserve Alan Greenspan and Pethokoukis never did. Looks like current Chairman of the Federal Reserve Ben Bernanke and United States Treasury Secretary Henry Paulson never even made it to class.
What would happen if we had the "Great Depression 2.0?" There's no simple, fast answer. The consequences, unintended and otherwise, could be good or bad over the long-term. To determine an actual estimate to the answer will take time and quite a bit of thought in order to understand the key assumptions. What we don't need right now is a rush to get something done by anyone in government.
It took us a long time to get into this financial mess and it's going to take us a considerably amount of time to understand and get out of it. Time to buckle down, study and take our lumps. In the long run, it will be worth it.
NOTE: James Pethokoukis is the money and politics blogger for U.S. News & World Report “ “Bailout Prevents Great Depression 2.0” http://www.usnews.com/blogs/capital-commerce/2008/9/22/bailout-prevents-great-depression-20.html |
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