By Request: Can I Foresee The Future?

Rapier asks:

When is it going to occur to you and most that the economic crisis is the most important story of their lives? Let me put it another way. Do you feel that the economy is going to get only somewhat worse and then will recover in some normal way? I am sure that is the case so think it though and just lay out some half assed guesses about how bad this recession will be compared to any post WWII recessions. Try to articulate what sources you rely on to reach these guesses.

I’m not really sure this hostile tone comes from. I’m also not really sure how I’m supposed to know how bad things will get. The answer to that questions depends in part on what policymakers around the world decide to do, and I have no idea what they’ll do. So while I’m sure we’re going to see a worse recession than we saw in 1982 — i.e., we’ll see the worst recession since the Great Depression — I’m not certain how optimistic or pessimistic I should be exactly.

What I will say is that I have a hunch that on the other side of this we’re going to see a substantial transformation in the structure of the political and economic system. It won’t be like the last two recessions where things went down and then they went up again. It’ll be more like the Depression in the sense that pre- and post-Depression America were very different places. And I mean that not just in terms of policies, but in terms of mores and social norms. I’m still trying to get a grip on Japan’s “lost decade” but one thing I’ve heard from a bunch of knowledgeable people is that it had a large social impact in terms of changing attitudes toward work and life and business.