Tuesday, October 16, 2007

Will there be an Economic Tipping Point?

I read in Warren Brussees BLOG that he thinks is theory about a depression in 2007 is coming closer into view. He admits that he might be as much as a year off, but he is still seeing his prediction from his book unfolding.

His BLOG seems to imply a sort of economic "tipping point"....a point in time where one characteristic of the economy changes past a sort of inflection point whereby any further change in that parameter causes a much larger change (an avalanch of sorts) in another response.

He sees the credit crisis, and crashing cost of the housing market as the catalyst for a fast decline in consumer spending, which kills our GDP quite quickly (since it accounts for 70% of it) and sets off a series of chain reactions which further closes down credit....etc....etc.....we have a closed loop cycle that now feedsback on itself.

Is he right?

Who knows....all I know is that it seems to me that the death of an economy is probably much like that of a human, and I hope you don't get grossed out by this, but I witnessed someone very close to me pass away, and they did not go easily.

No, they obviously loved life, and wanted so much to keep it....and their struggle was very long and hard. They eventually were overcome and passed on, but thei very last breaths were not easy and I could sense their final struggle to stay with us.

I see the economy in the same way.....it isn't going to go easily. It is going to try every way it can to survive and grow healthy again. It is probabably not as dynamic or resourcefull as the human body, but it surely isn't any more willing to roll over and die either.

But I'm thinking that the death throws of an economy will be no less violent than that of a human holding on to their last breath.....for our economy is after all still driven by humans. There are enough of us who don't give up easy...so I expect any downturn to be perhaps fast.

Like the depression in 1929....or even some of the other market crashes and panics before and after.

Let's hope Warren is wrong....let's hope he is WAY OFF and in his assesment.

And if he is right....let's hope all of us have the common sense to know that money doesn't make the world go around, and that there is still so much more to live for. Many people didn't know that around 1929....I'd like to think we can learn from the past.

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