After the risk of war, and the existential but somewhat abstract long-term catastrophe of climate change, the scariest risk we might face in the next 4-8 years is a roll-back of the limited protections put in place against a repeat of the 2008 financial crisis, or something worse. Trump is appointing people who are likely to make that happen. If the world is not in Great Depression 2.0 already, this could usher it in. I think it is entirely possible the world has entered a long-term economic downward spiral masked by the usual noise of ups and downs. This is from the blog Baseline Scenario:
The Wall Street Journal has a profile up on Mike Crapo and Jeb Hensarling, the key committee chairs (likely in Crapo’s case) who will repeal or rewrite the Dodd-Frank Wall Street Reform and Consumer Protection Act. It’s clear that both are planning to roll back or dilute many of the provisions of Dodd-Frank, particularly those that protect consumers from toxic financial products and those that impose restrictions on banks (which, together, make up most of the act)…
Introductory economics, and particularly the competitive market model, can be seductive that way. The models are so simple, logical, and compelling that they seem to unlock a whole new way of seeing the world. And, arguably, they do: there are real insights you can gain from a working understanding of supply and demand curves.
The problem, however, is that the people who are most captivated by the first theorem of welfare economics (the one that says that competitive markets produce optimal outcomes) are often the least good at remembering the assumptions that don’t apply and the caveats that do apply in the real world. They forget that the power of a theory in the abstract bears no relationship to its accuracy in practice.