Panic in the Real Economy

Mon, Aug 8, 2011 | Jared Woodard

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While we scrutinize the order flow and charts of various complex financial products, the Awl has a poignant reminder that n% market declines will translate into xn jobs lost in the real economy.

Should you panic? The experts say no, but the experts don’t understand just how close you’ve been cutting it lately, how you’ve been keeping so many balls in the air without even considering how you’re going to get away with it should any of them drop, how you spend your evenings drinking yourself into a stupor because it’s the only thing that will silence that insistent, nagging voice in your head that tells you it’s all going to come crashing down and in spite of the promise you once showed and the seemingly bright future ahead of you and the way you’ve always managed to pull through in the past, the world doesn’t work that way anymore…

A market selloff isn’t quite as scary when you have plenty of capital to deploy, a certain measure of autonomy, and the skill to recover financially in a consistent fashion. Periods like the fall of 2008 or the summer of 2011 are terrifying for the other ninety-nine one-hundredths of the populace precisely because they have no capital to deploy, their wages are stagnant or falling, and autonomy is just a word that tax cutters and TED speakers and Kant use to avoid confronting the material conditions of working people.

Notice that fans of fiscal austerity and Austrian economics tend overwhelmingly to be well-capitalized creditors rather than debtors. There is a certain coldness and inhumanity to the gaze that can survey our tottering economic edifice and leer, “Let it all come down.” It is hard enough to hold a society together under ordinary conditions, without all of these little Robespierres of the Right actively courting disaster.


4 Comments For This Post

  1. Damian Says:

    Best thing I’ve read all day. I don’t think the Austrians quite understand how bad the world will be after it all comes down. Thanks for, in an odd way, lifting my spirits.

  2. gappy Says:

    I respectfully disagree. First issue I have: “a poignant reminder that n% market declines will translate into x^n jobs lost in the real economy.” Evidence for this statement? I am not sure there is a relationship, not even a causal relationship, let alone an exponential relationship (tou can *detect* that? Wow). Extra points for dramatic effect though.

    “A market selloff isn’t quite as scary when you have plenty of capital to deploy, a certain measure of autonomy, and the skill to recover financially in a consistent fashion.”

    This is factually wrong. I know first-hand plenty of people who had plenty of capital, a great measure of autonomy, and *allegedly* had the skills to recover financially, whose hands quite literally kept trembling after 2008. Many are out of business now. This has nothing to do with being rich, free and *allegedly* smart. A market selloff is scary only for those who think they are smarter than they actually are. Those who don’t tend to pay risk management more than lip service. One can say anything about Goldman Sachs, except that they hadn’t far more powerful and qualified risk managers than any other investment bank. Still, I did like the mention of tax cutters and TED speakers and Kant in a single sentence.

    As for the Austrians, I don’t know Economics, let alone what those defunct economists think. I can say though that many fans of Austrian Economics are not well-capitalized creditors. Come think of it, I never met a rich guy who ever mentioned an Austrian to me. All the love for the Austrians seems to come from some academics and a few politicians on the loony fringe (Paul, Bachmann) who might not be sane but surely don’t seem very rich.

  3. isomorphismes Says:

    autonomy is just a word that tax cutters and TED speakers and Kant use to avoid confronting the material conditions of working people.

    lol.

  4. isomorphismes Says:

    w.r.t. what @gappy3000 said, you probably mean an x% decline in GDP translates into x^n job losses? Or rather the other way around. But of course the S&P is more volatile than US GDP.

    As for libertarians, in my experience they tend to be on the wealthier side. But really I’m just picturing Bryan Caplan and Chris Stucchio.

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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