In The Lord of the Rings, before the gates of Mordor, the king harangues his troups: ?I see in your eyes the same fear that woudl take the heart of me. A day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship. but it is not this day! An hour of woe, and shattered shields, when the Age of Men comes crashing down; but it is not this day! This day we fight! By all that you hold dear on this good earth, I bid you stand, Men of the West!"
Devoid of leaders, our demoralized financial markets look like scattering troops, easy victims to the carnage. Will we find ourselves in the midst of a mere slowdown, or are we dealing with a more profound crisis ¿Are there deep motives for this panic? It is true that underlying problems remain: facing competition from emerging economies, the main response from the West has consisted in a return to debt. That is to say, our growth has only been fed by increased debt.
It has been reveealed that our exagerated productivity has done little to enrich developed economies. The United States is enduring serious difficulties in producing industrial goods that it can sell on a massive scale, and the most striking example is found in its automobile sector. The reforms that are essential for facing this challenges require full development, time and sacrifice. But politicians have opted to retire to their living rooms, especially when they see hard work involved.
Besides the feeling of déjà vu, the circumstances extend further back than 2008. Dropping real estate prices in the United States could lay the foundation for increased construction and rising employment. The drop in petroleum prices very well could restore some lost purchasing power. And companies are piling up cash like never before. Further, market sentiment is tickling the levels it was at with Lehman, and that could augur some imminent improvement.
