Doom Loop, In Cartoons

Drawn from “The Doomsday Cycle”, joint with Peter Boone, in LSE’s Centrepiece Winter Issue  (permanent/direct pdf link: CEP centerpiece Feb 2010). 

I recommend the pictures – designed by the impressive team at the Centre for Economic Performance (we just did the words).

By Simon Johnson

11 thoughts on “Doom Loop, In Cartoons

  1. f u n n y :-) …and I agree Simon, “Off With Their Heads”: “As Teddy Roosevelt pointed out more than 100 years ago, concentrated economic power tends to take over political power, which runs counter to the democratic tradition. We have now learned that it also runs counter to sound economic policy.”

  2. Very nicely written for the layperson to comprehend, and lovely graphics. The funds rate/% of GDP graph is fearfully clear, although it may not occur to the unschooled reader that the funds rate is the primary tool used by the Fed to control the markets, and that tool has reached its limit.

    StatsGuy expressed the prescriptions in this piece in a colorful way that I found easy to visualize – reduce the velocity of money. As an engineer, I’d also make the analogy that this is like reducing the “Q” of the credit system – crudely, the ratio of recirculating flows (credit) to base flows (hard assets) to damp resonances that can distort or destroy the base flow.

  3. “We must break the Money Trust or the Money Trust will break us.” — Louis Brandeis, 1913.

  4. This Center piece article is excellent. It shows how far we have drifted since the breaking of the $/gold peg. It is interesting that this is not what Ricardo had in mind arguing for comparitive advantage even in a world of a Pax Britanica or later a Pax Americana. There is eaqually a really useful skewering of the € crisis by Soros in the FT today This shows the folly of proceeding with an incomplete system on a create and hope for the best basis. The consequences of a € area implosion would make the dip of 2008 look like a tea party. Pretty dramatic stuff.

  5. George February 21, 2010 at 2:20 pm wrote:

    “Ummmm ok if we´re doing humour/crisis explanation cocktails, South Park has to be a contender?”

    Sweet. :-)

    The Brits offer their own perspective.

  6. This is a depiction of the knights. Please prepare a cartoon that shows us the faces of the barons, bishops, viscounts, earls, dukes, archbishops, and monarch(s).

    Also, what does it say on the bicycle? Doom what?

  7. Took a quick look at The Doomsday Cycle. This should give Per Kurowski a sense of vindication:

    “That has been the path of successive Basel committees, which are now designing comprehensive new rules to ensure greater liquidity at banks and to
    close past loopholes that permitted banks to reduce their core capital. We both worked for many years in formerly communist countries, and this project reminds us of central planners’ attempts to rescue their systems with additional regulations until it became all too apparent that collapse was imminent.”

    This won’t:

    “If we triple core capital at major banks to 15-25% of
    assets, and err on the side of requiring too much capital for derivatives and other complicated financial structures, we will create a much safer system with less scope for ‘gaming’ the rules.”

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