Two articles (actually, an article and a book) to highlight this week:
First, the article. In “Why the U.S. Economy isn’t as Competitive or Free as You Think,” the FT’s Martin Wolf reviews French economist Thomas Philippon’s The Great Reversal, which, in Wolf’s reading, “overturn[s] much of what almost everybody takes as read about the world’s biggest economy.”
[Philippon] crisply summarises the results: “First, US markets have become less competitive: concentration is high in many industries, leaders are entrenched, and their profit rates are excessive. Second, this lack of competition has hurt US consumers and workers: it has led to higher prices, lower investment and lower productivity growth. Third, and contrary to common wisdom, the main explanation is political, not technological: I have traced the decrease in competition to increasing barriers to entry and weak antitrust enforcement, sustained by heavy lobbying and campaign contributions.”
Second, the book. Ten years after the “great deleveraging” of 2008, hedge fund billionaire Ray Dalio released Principles for Navigating Big Debt Crises. In synthetic overview and detailed, graph-based walkthroughs, he analyzes some of the worst debt crises in history — from the fall of the Roman Empire through 2008 — and argues that these are the results of cyclical flows in credit and debt.
You can download the entire 300-plus-page book as a PDF from the link above — or simply scroll through that page to watch an annotated replay of the cycle leading up to and through the 2008 crisis.
Managing money through the 2008 financial crisis felt in many ways like trying to navigate our way through a blizzard — a flurry of information would hit us day after day that we had to make sense of in order to be able to react well to the evolving conditions. Living through that experience reinforced the value of having a template to help us understand what was going on. While most people have not lived through many big debt crises, these crises have happened many times throughout history.