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Here's what I'm doing: Simon Johnson
Simon Johnson is a professor of economics at MIT.
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TEXT OF COMMENTARY
Kai Ryssdal:
This next item starts with a question.
By the end of it you'll hopefully be on the way to your own answer.
What are you doing. You as in, you. And everybody else who's trying to decide right now whether to change the way they manage their money. We're going to be asking that question of listeners and experts on this and the other Marketplace programs. And today, we check in with someone who thinks about the economy for a living.
Simon Johnson:
I'm Simon Johnson, I'm a professor at MIT Sloan.
I'm a senior fellow at the Peterson Institute for International Economics and I run a Web site with educational, hopefully, materials about the crisis and how we get out of it.
I heard a very interesting comment from another commentator, and he said that he learned as a young man from a mentor the following: in a crisis, don't just do something, stand there. So, that's what I've been doing I've been standing pat on all my investments.
I worked on financial crisis' around the world, and I never thought the U.S. would be in the situation where that kind of experience was not only relevant, but sort of front and center of the debate. So, I've been trying very hard to bring that to bear in hopefully a constructive, positive manner. And you know it takes somewhere between 18 and 20 hours a day. It has taken that since the middle of September. So, I hope I can get a bit more sleep this week.
And I'm afraid I get so little sleep during these crisis', that when I do sleep, I'm not distracted I don't have any bad dreams. I sleep for as long as I can.
I actually went to a local toy store with my two daughters, and bought something that they didn't really need. But I wanted to support the store, because we love the store and we don't want it to go out of business. And I think it's very important that nobody say, 'oh, I'm not going to purchase anything for three months and see what happens.' I think you have to remain calm and you have to go about your lives. And you have to persuade people with political power to do the right thing.
Ryssdal: Simon Johnson teaches economics at MIT's Sloan School of Management.
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Market Failure for lack of regulation, Invisible hand blamed for financial crash and spiraling death of a star
An unregulated business cycle falls on a pattern of steep booms or expansion,growth and proportionally equivalent steep busts or contraction ,recession, that can lead to a deep depression, the recovery cycle being directly proportional to the size of the initial boom. The final result of the end cycle of the boom is a shift of market power balance, the rate of change in capital accumulation, a shift of purchasing power because of the shift of wealth ,a redistribution of wealth, a concentration of aggregate supply and financial assets in a few hands and an equally inverse diminishing of aggregate demand that is worsened during the bust by a shift in value, assets lost value, fall in real estate prices, salaries ,etc. lost value of Bank financial assets freezes Banks, that increases more the concentration of aggregate supply and financial assets and catastrophically worsened by a government supply sided financial bailout that increases even further the concentration of aggregate supply and financial assets therefore exterminating aggregate demand , creating a freezing or stagnation because the falling rate of profit begins at the lower end of the market distribution chain therefore crashing distribution by finally exterminating aggregate supply also and eventually forcing government to finish the cycle according to the Eisenhower complex scheme or Spiraling death of a star. In order to avoid this a government demand sided approach should be used.
The problem is fictitious capital if it never existed and is the result of over valued assets because of a market manipulation by speculative gambling strategies that artificially inflated and drove up the price or value, inflating the bubble, you cant restore its original value unless you repeat the same cycle that pushed their false value during the boom.
Hi Kai,
I enjoyed your little bit of comic relief Monday (10/27/08) evening when your guest jester, Mr. Simon Johnson, Professor at MIT Sloan and senior fellow of the Peterson Institute for International Economics, recommended that in the largest global financial crisis of our lifetime that his best advice was to: just stand there. And he didn’t even develop this strategy himself, he got it from an associates mentor.
If Simon was not kidding then he was hallucinating, do to his lack of sleep since he has been working on his analysis of this problem 20 hours a day for a while now.
If this is where he is trolling for his financial insight too bad your jokester missed the Kung Fu episode where Master Po was teaching Grasshopper that when everyone around you is in a panic and acting irrationally that action is immediately needed; and that controlled action was calming ones fears, clearing ones mind, invoking ones ability of critical analysis, developing a plan for ones self based on the best available information, and then acting on that plan with economy, diligence, and with full personal responsibility.
Or if your simple-minded deep thinker needs a myth or jingle to guide him in these turbulent times maybe he should steal a lesson from one of Americas great financial gurus, Mr. Kenny Rogers where he teaches the philosophy of know when to holdem, know when to foldem, know when to walk away, and know when to run.
Hi Kai,
This is Tom Bowden from Pembroke, VA. I enjoyed your little bit of comic relief Monday (10/27/08) evening when your guest jester, Mr. Simon Johnson, Professor at MIT Sloan and senior fellow of Peterson Institute for International Economics, recommended that in the largest global financial crisis of our lifetime that his best advice was to “just stand thereâ€. And he didn’t even “develop†this “strategy†himself, he got it from an associate’s mentor.
If Simon wasn’t kidding then he was hallucinating, do to his lack of sleep since he has been working on his analysis of this problem 20 hours a day for a while now.
If this is where he is trolling for his financial insight too bad your jokester missed the Kung Fu episode where Master Po was teaching Grasshopper that when everyone around you is in a panic and acting irrationally that action is immediately needed; and that controlled action was calming one’s fears, clearing one’s mind, invoking one’s ability of critical analysis, developing a plan for one’s self based on the best available information, and then acting on that plan with economy, diligence, and with full personal responsibility.
Or if your simple-minded deep-thinker needs a myth or jingle to guide him in these turbulent times maybe he should steal a lesson from one of America’s great financial gurus, Mr. Kenny Rogers where he teaches the philosophy of “know when to hold’em, know when to fold’em, know when to walk away, and know when to runâ€.
Isn't advocacy of needless consumption what got us into this mess? I remember bush encouraging Americans to buy and buy more after the terrorist attacks in 2001 and I remember bush encouraging Americans to buy homes even though it wasn't necessary. Now we're told to buy more with the economic stimulus and from this person. Frankly, I take my financial advice from Walden by Thoreau. We should consume as little as possible and be happy with our friends and life.
I like the "November to May - go away" approach, which I followed this year. Who says you have to be battered. Yes I am sitting tight but it is a higher place than those who have to sit at the bottom. No where is it written you cannot get back into the market from a sitting position. Thank you and David Johnson for the advice back then.
My comment is that while it would be foolish and irresponsible to go and spend a lot of one's life’s savings, if the general public and this includes me and you stops spending at a reasonable rate there will be a major "trickle down effect", and everyone will suffer.
There are many good values out in the market now, so if you need a bit of masonry work, or need a new pair of shoes, a new plant for the back yard or a bag of soil, by all means go out and purchase reasonably and wisely.
By you purchasing that loaf of bread, candy bar, used motorcycle or what ever, it will in the short and long run help the economy and the world’s economy.
Now, go out and help your neighbor by getting your nails done and that chiropractic adjustment!
I may have my head in the sand but I am standing still at the moment. I have about half my retirement savings in 401K with a pretty aggressive portolio and then a bit in IRA's and the rest in money market accounts. I only have about 3 years to retirement but hope I don't have to dip into the 410K for several more. Will it have recovered by then??
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