If you watch the nightly business news (or for that matter any business news) you will see a variety of economists parade across your screen with their ideas of what’s right or wrong with the economy. Although this is interesting, I’m not sure it helps out much as it relates to understanding what’s going on with our economy or economic future.
Instead I think we should look to economic historians about what’s happened in the past and see if there are indications that we are in the same place again. Fortunately, or unfortunately history seems to repeat itself.
Some of the reasons I believe historians are more important than economists are:
Long-term trends seem to repeat themselves.
Many would say that we are now in a secular bear market. In fact, if you look back to 1965-1981 you might see some startlingly similar activities that are happening. The exact details of what happened during that period are different than today, but the general theme is very similar.
Our deficit problem and possible solution has a theme.
In Reinhardt’s and Rogoff’s book This Time Is Different they talk about Greece being a serial defaulter on it’s debt. They also mention that in the United States we tend to debase our currency. If you watch what’s going on today it looks like that is exactly what is going on in both countries.
History can help us understand that theme’s we live through today have often happened in the past. We shouldn’t be surprised when those same themes re-appear.
Black swan events aren’t that surprising.
In a secular bear market events that supposedly happen every several hundred years seem to come along every few years. If we look at the history of bubbles in human kind, this should not be a surprise.
We tend not to learn from history because our memories are based on what we experience as adults. With long-term trends in secular markets, it’s easy for us to not know about what’s come before because we didn’t experience them.
New events seem like it’s new. I find that there really aren’t new events, but just recycled events that look a little different this time around.
What are your thoughts on history versus economics?
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