The Stebbing-Heuer Project devotes most of its pixels to uncovering, advertising and demonstrating examples of poor reasoning and drawing lessons from these. While this is a necessary for the task of improving the quality of reasoning in the world, it is not sufficient for that task – we should also uncover and advertise sound reasoning and its fruit – pithy insight. This also brings balance to the Project.
So it is with pleasure that I present a pithy insight from Deutsche Bank’s head of global fundamental credit strategy, Jim Reid, into the nature of the economic system, the trouble that it’s in, and how it got into such trouble.
I don’t think it’s too controversial to say that personally I believe that capitalism is generally the best economic system. However part of the problem today is that over the last 15-20 years, capitalism has been propped up every time it’s about to go through one of the cyclical creative destruction phases.
Compounded up that’s left us with a big mess to clear up across the globe and a lot of sub optimal resource allocation. That’s not the fault of capitalism per se it’s the fault of the authorities for not letting cycles naturally evolve. This has become increasingly more difficult as the imbalances build on top of each other.
So across a lot of the Western World we’re left with too much debt, too much inequality, low real wage growth, limited conventional tools to help the economy to de-lever, QE and ZIRP and a political backlash against the mainstream. Until we find a better solution voters are likely to have a bias to find alternatives whatever the economic literacy of these views.