5 years after the worst economic meltdown (US housing et al) as
i watch the indices erode shareholders wealth and the Indian currency plummet,
i cannot help but muse over the underlying cause of economic crises in
different parts of the world.
I have read of more than a handful of well known economists
(Nouriel Roubini, Peter Schiff, Ron Paul, Raghuram Rajan etc etc) who claim to
have predicted the housing bubble and almost all of them have something or
someone to blame it on. These are people with considerable influence at a
global scale. Yet nothing could be averted.
Housing bubble happened
US/Global deficits are at an all time high
Eurozone is terribly stressed. Greece Spain and Portugal are
almost bankrupt
The Ver2. of Asian crisis is in the offing
Excessive liquidity flowed into Emerging Markets
Talks of stimulus-tapering have created a new crisis in Asia
My argument is that if so many Economists had the power and
the intelligence to opine and take credit, why are we staring at such a dismal
global scenario?
Human beings are driven by emotion of greed and fear
(cognitive biases) and no one has the ability to take the most rational
decision at the right time. (Thats God’s job really). So our central bankers
all over the world have failed consistently. Since the time I developed a bit
of understanding of economics, I have come across only 2-3 actions that central
bankers take. Reduce/Increase interest rates by a few bps, Issue inconsequential
- dovish or hawkish statements, give a dubious sense of calm to the citizens and
opine liberally. Because that’s the easiest thing to do.
But has the world economics been sorted?
No! Actually its worse off than what it was 30 years ago.
But there is a counter opinion. Decisions taken by central bankers
should be based on big data of cause and action and consequences. Only then can
a global equilibrium be maintained. It is not humanly possible for the likes of
Ben Bernanke, Mervyn King and Mario Draghi to analyse and act in absolute
harmony that prevents future crisis and regulates overspending and irrational
exuberance.
Between 2005-2008 maybe US interest rates should have risen
far more.
Maybe Global salaries / benefits should have been drastically
slashed to maintain export and industry competitiveness and reduced dependence
on China that played havoc across the world with an artificially cheap
Renminbi.
I believe that today no one can write algorithms and
collect/analyse data better than Google. Why don’t we reduce our dependence on
our central bankers and outsource this job to Google.
Google can analyse a 200 yr action history of central banks
of over 150 economies on the planet and chart the action and consequence graph
and effects thereof and create a perfect model for each and every nation and
define the interest rates and all economic actions that have a bearing on our
lives. Algorithms will take harsh decisions which humans fear to take. Algorithms
will become perceptive and computers will develop intelligence to take rational
decisions.
This is seemingly the only way out and we won’t get a chance
to blame a banker or an economist because the world and nations would be in a
state of equilibrium.
No one can deny that all of our economists and central
bankers have failed miserably till date.