Market fundamentalism

If you're a Republican, you probably hate George Soros and aren't inclined to listen to his advice about economics as you are to that of some talking head on Fox. I don't know how he was received at the World Economic Conference in Davos this morning when he said

"The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars.''

but it makes sense to me. The figures bear that out as foreign-exchange reserves around the world have fallen to a record low recently as the share of the Euro increased. Of course increasingly unwilling is not a measure of the limits of the unwillingness, but reducing interest rates may not be the way to reduce that trend. It was an ill conceived expansion of credit that began in the Ronald Reagan 1980's

"That created an asymmetric incentive system, a moral hazard, that allowed the expansion of credit.''

Soros has been predicting the decline of the dollar for several years and despite the usual meaningless accusations of being a liberal, he's been right.

"We are there to clean up after bubbles first rather than to prevent the danger,''

said Stephen Roach, Morgan Stanley's Asia chairman, of the latest rate cut.

"It's a dangerous, reckless and irresponsible way to run the world's largest economy.''

Of course dangerous, reckless and irresponsible are words frequently used in describing the attitude and the actions of the Bush administration and the many messes we're in don't help the effort to deny it. If you hear any thing about this conference from the usual tabloid TV sources, it won't be much; this conference isn't the sort of thing that gets in the way of lachrymose laments about overdosing celebrities or steroids in sports or lurid crime stories, and the public isn't accustomed to giving a damn about any larger picture than the one on that flat screen HDTV they just bought on credit. They will just go on listening to candidates bitching about who believed Bush's story in 2003 or who loves Jesus more or who represents change without specific and realistic explanation. Knowledge of economics, and expertise with financial and monetary policies are nowhere near as appealing as the customary pandering to prejudice, greed and the glory of war.