Bright Side Of The Apocalypse

by digby

I do not necessarily endorse this view because my crystal ball is in the shop. But I’m throwing it out here because it’s a little bit different than anything I’ve read recently in that it says that as bad as the financial crisis is, it’s not actually … that bad:

Yes, the current crisis signals an end to the remarkable free ride we Americans have had for decades, when we financed our rampant, zero-savings consumerism with boatloads of borrowed investment money from abroad. “I think this is the end of that era of a 6 to 7 percent current-account deficit,” says Rogoff. “The financial sector was key to that dynamic. For sure it’s going to drop to half that level. [The current-account deficit] might even go back to 1 percent.”

So consumption will decline. There will be an economic slowdown of unknown severity. But overall that’s a healthy deflation of an economic bubble that the subprime disaster was only a symptom of: as a country, we need to stop buying things we can’t afford. And Washington—the next president and Congress—will have to make some very responsible choices about how to regulate the new landscape that has emerged on Wall Street without overdoing it (the impulse will be to place a regulatory chokehold on banking since it’s now clear to everyone that underregulation got us into this mess). ” There’s no doubt that the U.S. financial model has been undermined,” says Rogoff. “The question is, are we going to come up with better regulation and produce an American finance 2.0 that’s more robust and better than the first one and keeps the financial sector as the flagship of the American economy? Or we going to regulate it into a coma?”

[…]

When times really get tough, when there are belligerent rising powers or threats, the dollar is still the world’s safe haven because America is still the only reliable great power out there. Set aside for the moment the deeply unpopular invasion of Iraq. Every foreign government knows that America is still the main stabilizer of the international system—American power overlays every region of the planet and supplies the control rods that restrain rogues, hostile states and arms races from East Asia to Latin America, enabling globalization to proceed apace. This status quo is unlikely to change over our lifetimes.

Sure, we’ve suffered a lot of self-inflicted damage over the last eight years. Conan O’Brien didn’t have to explain himself when he joked the other day, after the Dow’s record one-day 778-point drop, that “as a result, President Bush was able to cross off the 10th and final item on his administration’s bucket list.” So devoid of credibility and influence is Bush today that the bailout package seemed to move forward in spite of, rather because of, his support. So, yes, as a country we’ve slowed to a crawl in the great global race. But we’re still lapping everyone else. We’ve got time. And there’s no reason we can’t start to get it right come Jan. 20.

There’s much more and you should read it all. As I said, I’m not endorsing this view, but I think it’s important to hear all voices. The gentleman quoted in the piece, Harvard economist Kenneth Rogoff, predicted the financial crisis and so has some credibility. On the other hand, he’s advising John McCain and so he obviously has no common sense. Take it for what it is.

Regardless of the details, many of which I instinctively recoil against, I needed to read something today that wasn’t entirely predicated on the notion that we are all doomed. Tomorrow, I’ll be ready to face the apocalypse once again.

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