Dark cloud over our economy defies 'expert' forecasts

The Baltimore Sun

It would be lovely to write something for this page totally apart from the current economic sadness. But I can't bring myself to do so. The topic is so dominant, so pervasive, so evolving in ways we cannot begin to fathom, that it can't be shunted aside in favor of littler things.

On my radio show, we deal with other subjects for variety and because other things are interesting in and of themselves. Yet when I talked the other day with Dr. Harry Brandt, the director of the Eating Disorder Clinic at Sheppard Pratt Health System, about childhood obesity, a listener called in to castigate me for departing from talk about the falling markets, the growing epidemic of joblessness and related matters. And here I thought I was giving the fellow a break. Silly me.

Wherever I go, without prompting, people ask me about the credit market meltdown. They want to know what I think is going to happen. I tell them I don't know - and that nobody knows. As Nassim Nicholas Taleb, author of The Black Swan, puts it, "There is no model for what's going to happen."

Watching Mr. Taleb with various interviewers on YouTube this past weekend made me nearly as nervous as he made the people asking him the questions. This is the man who made famous the idea that unpredictable randomness is what causes the Big Things, and that economists and bankers are feeding us swill when they pretend to be able to assess investment risks mathematically. He says he used to wake up in the morning worrying about the credit market meltdown, but now these worries wake him in the middle of the night.

One day last week, I talked with a well-informed friend about the current situation, and by the end of the conversation I was physically ill. Stressed out. In need of a pill, a potion, a stiff drink - anything to take my mind off the horrid politics of Washington, where our celebrated leaders are concocting their foredoomed stimulus bill, which will pile ever more debt onto ordinary people in order to save old jobs and create new ones. The estimates of how much each new job will cost range from $100,000 to $300,000.

Why are they doing this? Because the political imperative is that they have to do something, and they have no more idea of what to do to get us out of the economic tailspin than you or I. Hence they must pretend to be able to reinflate the busted bubble.

Another goal, one more likely to be achieved, is the Obama-Pelosi-Reid scheme to give so much money to core Democratic constituencies that their beloved party will become nationally what it is in Maryland - a political monopoly. In that, to their minds, lies our salvation, and their perpetuation of personal power.

One can be forgiven for asking how a mere talk-show host/columnist can presume to say with such certainty that the "experts" don't know what to do or how this thing will work itself out. So I forgive you. But I'm not making this up. I've searched daily for some reassuring statements from economists, bankers, politicians or pundits and have found none. This weekend, I had the chance to talk with a man of national prominence in the investment world (I can't tell you his name because this was a personal conversation) and asked him how he saw all this woe playing out. He said he had no idea and neither does anybody else that he knows of.

Mr. Taleb believes we are heading toward what he calls "Capitalism Two," a new economic model that will see banks become utilities, shorn of their risky speculative aspects. It will be a time when people learn once again to make their living from their occupations, not from investing the money they make in stocks or other speculative assets. Barbers, he says, will cut hair and trim beards for their money. Dentists will rely on dentistry, not stock portfolios, for their daily bread. Your house will be the place in which you live, not an investment vehicle. And so on.

The trick is getting from here - the failing "Capitalism One" - to there. And he thinks we are far closer to the beginning of this journey than we are to its end.

Ron Smith can be heard weekdays, 3 p.m. to 6 p.m., on 1090 WBAL-AM and WBAL.com. His column appears Wednesdays in The Baltimore Sun. His e-mail is rsmith@wbal.com.

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