New York Times economic analyst David Leonhardt - about whom I've written before - is, like most of his fellow countrymen, deep in the clutches of the "psychology of previous investment," a near-clinical condition in which we throw more borrowed money after bad borrowed money in the belief that things must continue the way they've been going, in spite of any evidence of the deep and disfiguring unhealthiness of that way of life. In an economic column in today's New York Times, Leonhardt juxtaposes the two following statements:
"The overhang from the 20-year bubble in stocks and then real estate won't simply go away."
"In past recessions ..., a few months after [a slowdown in the rate of job loss], the economy typically began growing again. The vicious cycle turned virtuous."
We are asked to accept the idea that the return to a "virtuous cycle" would entail the return to what Leonhardt acknowledges to have been two decades of a "bubble economy" (his time-frame may be too short, if we date the beginning of our bubble to the moment when the U.S. began its descent into a deficit economy, which will bring us back to the 1970s at least).
Language should mean something. A "virtuous" cycle implies a period that is based upon virtue. A "vicious" cycle suggests a time when vice governs. If Leonhardt wished to be accurate, he would have to say that what he and most others like him aim to achieve is a return to a vicious cycle - a time of accelerating booms and busts all based on the belief that you can get something for nothing, that indebtedness is sound economic behavior, and that living beyond one's means represents the normal aspiration for rational economic behavior. If we truly wish to "return" to a "virtuous" cycle, we will need more incisive analysts - people who can get themselves out of the rut of path dependency - to see that what is needed is an encouragement of actual virtuous behavior. Don't count on seeing any of this sort of analysis anytime soon on the pages of the New York Times, or really anywhere that is typically described as "mainstream." In this sense, we've been in the midst of a vicious cycle for longer than most are capable of recognizing...