Meltdown! The Global Competence Crisis
I thought things would be bad enough but they turned out to be a lot worse. I thought a year ago we were looking at the “fi rst truly global bubble” in asset prices. The credit crisis looked to be so predictably powerful and unstoppable then that I likened the experience to “watching a slow
motion train wreck,” and I predicted that “one major bank (broadly defi ned) will fail within 5 years,” for which I got considerable grief as a doomsayer, as the less optimistic strategists usually do. Well a year later one bank failure looks positively quaint as a prediction. Ironically for a “perma bear,” I underestimated in almost every way how badly economic and fi nancial fundamentals would turn out. Events must now be disturbing to everyone, and I for one am offi cially scared!
Living Beyond Our Means: Entering the Age of Limitations
How many times over the last 200 years have gloomy economists predicted limitations to growth? And always they were wrong. Science and human ingenuity always came to the rescue. Instead of rising steadily in price, raw materials and food fell in real terms. And since hourly
income rose, raw materials became ever more affordable as the specter of starvation, although always around, steadily retreated. Food, for example, fell from 70% of a typical American’s budget 200 years ago to about 10% today. And, every time a warning was redundant, the idea
that science always wins and that the human brain and talent are boundless and can conquer all took deeper root. We have learned in the stock market not to underestimate the power of repeated events to create a consensus. Humans are just plain eager to see patterns, and 200 years of increasing plenty in the face of recurrent pessimism is serious reinforcement indeed. It is hardly surprising, therefore, to fi nd ourselves in a position where faith in our ability to rise above the planet’s limitations is complete.
Thanks to Vinod from MSN BRK Shareholders Board
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