Rare and improbable events do occur much more than we dare to think. Our thinking is usually limited in scope and we make assumptions based on what we see, know, and assume. Reality, however, is much more complicated and unpredictable than we think.
However predictable and solid the financial markets seemed to some economists a few years ago, and however improbable the current collapse of the international banking system, it is actually unfolding before our eyes.
Why has it come as such a surprise to Wall Street and banking officials? Weren't there any indicators? How was Peter Schiff and others able to see the hazards in the road ahead?
Looking back on the events of the past 20 years it seems the evidence of trouble was present but so too were those who were addicted to putting a positive spin on the economic data.
Voodoo economics prevailed. The dominant economic theories seemed to promise ever expanding prosperity. Peter Schiff and Ron Paul were ridiculed and scorned for their warnings of impending doom. Few wanted to hear about or plan for a collapse that they deemed impossible.
But the Black Swan, however improbable did appear. And our predominant, cherished computer models failed to predict its coming. And we now feel the tightening grip of an uncertain future. Will we have shortages? Will we experience deflation or hyper-inflation?
How did we get here? Who is to blame? What will the coming years be like? Will the economic stimulus succeed or will it make things worse? If it succeeds in the short term will it lead to a strong economy or merely to a prolonged depression?