The idea of Obamacare was to harness the power of the market to deliver better health care. Perhaps the resulting monstrosity is our punishment for being so slow to see that markets aren’t the solution to everything.
The aftermath of the Lehman Brothers Holdings Inc. bankruptcy in 2008 was a scary time: One measure of stock-market volatility, known as the VIX or the “fear index,” reached a peak daily closing price of more than 80, compared with about 18 today. Scarier is the knowledge that we’ll be there again sometime. That’s how markets go: Unexpected chaos is the rule.
The European sovereign debt crisis stands as the latest in a long line of similar crises. Argentina in 2001. Russia in 1998. Mexico in 1994. The list goes back into history. Debt crises are about as natural as earthquakes, but this time there is something different -- and possibly more dangerous.
It’s an iconic image: the professor of physics, wild hair, Einstein-like, standing before a chalkboard covered with arcane equations. It could be Einstein himself, the scribbled mathematics describing his theory of relativity and the link between mass and energy, E=MC2.
What is the value of time? This question was once a matter for philosophers such as Plato or Aristotle. Today economists claim to know the answer. The future, they say, is “discounted” because the value of having something or some amount of cash is greater than the value of having that same thing or amount of money a year from now.
Last year, when the U.S. Securities and Exchange Commission came out with its final report on the flash crash, the stomach-churning event of May 6, 2010, that wiped $1 trillion of value from the markets in less than 30 minutes, it never managed to explain why the episode happened.
The possible collapse of the European monetary union, at least in its current form, brings home the truth that there’s little in economics that is certain. We’re again “thinking the unthinkable,” as we were a few years ago when we suddenly realized that financial engineering hadn’t banished financial crises, and that 70 years of relative stability since the Great Depression didn’t guarantee a thing.