The future hinges on forces not easily seen among all the news clutter. Like the 1930s, the “experimenters” in Washington are unquestionably bright but so inexperienced as to often be inept. Their mental models have proved time and again to be too small for the huge task at hand. The factors that make headlines—growth vs. stagnation, inflation vs. deflation, the cost/benefit trade-offs of multiple monetary and fiscal stimulus packages, fiscal budget and trade deficits, dollar devaluation—fall substantially into the realm of the unknowable. Those factors that get little public attention (Will the growing segment of the population that feels disenfranchised be made to once again feel empowered? Will business shake off the burden of leftist government intervention and higher taxes and become spontaneously optimistic?) are the ones that will determine whether employment and the economy generally rise or whether they stagnate. Will the “great moderation” be followed by the “great malaise”? I wish it weren’t so, but I wouldn’t bet against it.
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