(As an aside to this post, I’m more than a little annoyed that not one dollar has been donated to donorschoose.org on my behalf, which I wrote about here. And this is likely the last post until something happens on that front, which may mean that I’m done blogging altogether.)
I was too young in 1987 to be paying much attention, but let’s just recall that on Black Monday the DJIA fell 22.6% in one day. And now, the S&P 500 has fallen 17% in two weeks. I’m not saying that this is good, or that worse things won’t follow. But this is not unprecedented, and I don’t mean the Great Depression. In 1997, Thailand’s stock market dropped 75% – Hong Kong’s dropped 25% in four days. Also, recall that it was less than 20 years ago when experts assumed that the natural rate of unemployment was around 7% (it is currently still under or around 5%).
Arguably, there is something new here. Globalization, combined with securitization of capital and loans, combined with housing crash, combined with a baseline mentality set to 1992, all mean that this is the 100-year flood.
And we’ll see something special when New York City comes to the realization that the two-tiered economy which it has accommodated itself to – with finance salaries supported an incredibly posh infrastructure of high-end real estate, retail, and service – is no longer viable.
But what is happening now is a panic.