The Economics of Optimism
25 February 2009
This from yesterday's news:
Federal Reserve Chairman Ben Bernanke told Congress on Tuesday the worst recession in decades might end this year, and that regulators aren't planning to nationalize banks. Investors, battered for months by news of massive layoffs and huge bank losses, took heart from the comments.
As a consequence the Dow Jones rose 3.3%.
It dropped again later, and by the time you read this it will have risen and fallen three or four hundred times, even though it's still the middle of the night in New York. But doesn't this seem a much cheaper way to guard against a rollercoaster stock market than throwing billions of dollars at the banks? Every time things look black, a bloke with a financial title and a sharp suit should appear on the news and say, 'Everything's fine, don't worry. Relax, we're going to be ok.' And then all the professional investors can breathe a heavy sigh, say, well that's a relief, and start spending their money again. How hard is that?
You have to like the line: Investors, battered for months by news of massive layoffs and huge bank losses, took heart from the comments. There's been no amount of bad shit for the last year and a half, but some guy says, the hell with that, we're good to go, and they all perk up.
Now, did the guy really mean it, or was he just saying it to make everyone feel good about themselves? Or is he running some sort of illegal scam? He placed a bet that the Dow was going to rise by over 3% and then used his influence to make it happen? Maybe it was nothing more than an office sweep, and he just did it for a bit of a laugh.
The real question is, the question that the New York Times will inevitably be asking this morning, is what effect will all this have on the sales of dark, bloody-yet-quirky Scottish crime novels? Things were looking up in the world of Barney Thomson last autumn, but over the winter sales once more dipped as the credit crunch took its bloody toll. There have been rumours in the press that far from being on the verge of launching a hostile takeover bid for Amazon.co.uk, as was being mooted before Christmas, the beleagured Long Midnight Publishing might itself fall prey to the multinational rabid velociraptors of the publishing world.
However, as chairman, president-for-life and chief executive of Long Midnight Publishing, I say to you now: Everything's fine, don't worry. Relax, we're going to be ok.