A short PBS interview with Benoit Mandelbrot and my compatriot, Nassim Taleb, on the current financial/economic crisis.
It underlines my ongoing fear that this crisis will recast the world at a fundamental level. Why? Our simplistic, slow, and fractured 20th Century control system isn’t capable of stabilizing a financial/economic system of this complexity/speed/size once it becomes very turbulent. As a result, the global system will follow its own course, dictated by its hypercomplex internal dynamics and feedback loops, destroying everything that gets in its way.Otherwise known as Chaos;)
Like Nassim, I hope I’m wrong.
snip
One of the most interesting aspects of this crisis is that it is truly a global crisis. This is arguably a first. In historical crises, wars or catastrophes, there is always a large external environment of relative normalcy. Our first real global event will directly impact all economic activity from Botswana to Albany at a relatively granular level. It’s even more interesting since the impact of this event is occurring simultaneously in all places at once.
Without commercial credit, trade grinds to a halt – whether in 1706 or
2008. Now as commercial credit has been severely impaired, global trade
and production are indeed threatened on many fronts. Contributor Harun I.
sent in this Bloomberg story about agricultural production being at risk of
declines due to the tightening of credit to farmers: “The credit crunch is
compounding a profit squeeze for farmers that may curb global harvests
and worsen a food crisis for developing countries. Global production of
wheat, the most-consumed food crop, may drop 4.4 percent next year,
said Dan Basse, president of AgResource Co. in Chicago, who has advised
farmers, food companies and investors for 29 years. Harvests of corn and
soybeans also are likely to fall, Basse said.” Here we see the “unintended
consequences” of the credit crisis. Commercial credit is the lifeblood of
capitalism, be it the Version1.0 of 1072 or V1.9 in 1706 or V2.11 in 2008.
Governors David A. Paterson of New York and Jon S. Corzine of New Jersey
added their voices Wednesday to the growing support for a second federal
economic stimulus package, saying state governments face devastating
cutbacks if they did not receive assistance soon. Appearing before
separate congressional committees, they said that their states, like many
others, had already moved to address budget deficits. Their actions alone
would not be enough, they said. Their remarks increased the pressure on
the federal government to include money for state governments in the
next round of economic stimulus legislation, pointedly putting the requests
of two of the nation’s most populous states on the [Cong
