From historian Walter Russell Mead’s blog:
It appears that while investors panic quickly and head for the exits at the first sign of trouble, many politicians, journalists and social thinkers go to sleep when the fire alarms begin to ring. The success of the West in establishing a solid set of social, political and economic institutions and policies after World War Two was so durable that we came to believe that the arrangements made then would last forever, and that further change would be slow and evolutionary rather than quick and disruptive.
The success of central banks and governments at reining in inflation, easing recessions and achieving soft landings in the 1980s and 1990s further reassured us that while there were some problems and dangers here and there, our house stood on firm foundations and was structurally sound.
I still hope the old house can weather one more storm, but it is clear that we can no longer take that for granted. The ground under the foundations is washing away; the wind threatens to rip off the roof, and cracks are appearing in load bearing walls. Sooner rather than later we are going to have to redesign and rebuild.
Financial market crashes come and go; the world may spin back into recession or the economy may wobble for a bit and then stabilize. But we’ve had a glimpse into the abyss; in Europe, in Asia and in the Americas some of our most fundamental institutions and social policies are going to have to change.
Wise words, indeed.