The New Republic has an intesting background on the current financial crisis: how we got where we are, the gravity of the situation, and perhaps some ideas going forward. It posits that we’re currently facing a need to change the fundamental rules of the global financial system that has been running for, depending on how you count, either since the 1940’s or the 1980’s. It’s an educational read.
I’m not an economist, but then again, when Real Live Economists attempt to predict the future of complicated chaotic systems like the global or national economy very far into the future, they’re wrong a heck of a lot more often then they’re right. They’re just too many things that can affect matters. My feeling is, though, that we’re in for something akin — at least — to the recession of the early 90’s, and perhaps worse, like the stagflation of the 1970’s. I’m still trying to wrap my head around what’s going on. Could the financial system really break down in a fundamental way like it did in the 1930’s? Or are we just looking at a another readjustment?
In the end, my guess is that it’s the later. Technological breakthroughs and refinements bring both increases in productivity, as well as new market opportunities. This runs on an increasing, exponential rate, and has for, well, effectively ever. It’s these advances that ultimately force economies to trudge onward and upward. Remember that capitalism isn’t a zero sum game. It’s just a matter of when the log jam breaks free, and what kind of pain we feel while all this growth is bottled up. That’s the question that no one knows the answer to.