One topic that I have tended to avoid in my blog posts is the subject of economics. This is because the ‘dismal science’ is one of those subjects where I feel a little out of my depth. Whereas I can make sense of events in many other areas of everyday life, even to the extent of making modestly successful predictions about what should occur, behavior in the world of business and finance tends to defy my expectations. For a long time, I thought this was due to my weak understanding of the basics of economics. But now I am wondering if it is because the economic world is, frankly, crazy.

I am beginning to worry that the modern US and global economy has become untethered from reality or even basic common sense. French President Nicolas Sarkozy seems to share my alarm when he recently said that we now seem to have a global “financial system which is out of its mind and which has lost sight of its purpose.”
[Read more…]