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August 26, 2011 / Raffy Pekson II

Using Shakespearean Tragedy to Read the Global Economy Drama

NYSE Floor

I found this editorial in the Financial Post and liked the analogy of the economic crisis that is hitting everyone in world, that Craig Alexander, SVP & Chief Economist TD Bank Group, presented in the format of a typical Shakespearean tragedy. Here’s a glimpse of it:

Act 1: Greed and hubris in the Housing Bubbles

Act 2: Mispricing of risk throughout the financial system

Act 3: Denial by governments, financial markets, individuals (that things are bad)

Act 4: The Global Financial Crisis (hits us on the face)

    Scene 1: Unwind massive mispricing of real estate in many countries

    Scene 2: Economic contractions and rapidly rising unemployment

    Scene 3: The political crisis around the world (We are here!)

    Scene 4: True global rebalancing is completed (questionable?)

About Act 4, Scene 4:

“The fourth and final scene can take various forms. To simplify to two scenarios:

“If emotion and politics dominates, financial stability and the economic recovery is in jeopardy, and an ugly fourth scene will ensue.

“If rationality wins out and tough policy decisions are made with leadership and resolve, the legacy of the financial crisis will be addressed, the unrealistic prior fiscal commitments will be unwound, and fiscal policy will be put on a long-term sustainable path, which ultimately unwinds the imbalances in the global economy.”

But, you have to read the entire editorial plus another one by Dr. Sherry Cooper, Chief Economist BMO Financial Group, to make your own conclusion as to how Act 4, Scene 4 will really play out – or not!

Read more at the Financial Post, “How Will This Tragedy End? Two Canadian views on the U.S. debt crisis”

Photo by TigerHawkBlog at Flickr.com

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