Economic Observations From Andrew Ross Sorkin
Prominent ‘New York Times’ DealBook Founder Shares Some Not Very Sunny News in Santa Barbara
While it could have used a little more Margot Robbie in a bubble bath (see this fabulous scene from The Big Short if you’re too young to get the reference), financial journalist Andrew Ross Sorkin’s “Inside the Minds of Today’s Changemakers” lecture at UCSB on Saturday was certainly thought provoking and engaging. Though it gave a somewhat depressing perspective on the economy and corporate America, which — to be fair — would be hard to avoid these days, there’s no doubt that Sorkin is a smart guy with his finger on the pulse of much of what’s making things tick these days.
The author of Too Big to Fail and co-creator of the TV series Billions told the UCSB Arts & Lectures audience at Campbell Hall that he believes that the “big lesson about financial panic is that it’s actually only about one thing and that is debt.”
He continued, “Debt is the match that lights the fire — it is the magic ingredient.” He added that the phrase “too big to fail” has nothing to do with banks anymore. “It has to do with municipalities, towns, cities, states, and countries.” He used the Greek debt crisis as an example of the many interconnections and tentacles that could have taken down all of Europe.
“Global government debt is now at $91 trillion, which is 84 percent of the entire world’s GDP. Think about that,” said Sorkin. “Think about how the Nasdaq could ever even work. Now in the U.S., you know — because every politician talks about it on television every 10 seconds — that our federal debt does cost $35 trillion now. To put $35 trillion in some semblance of context, because these numbers are so mind boggling that they always sort of go past and you can’t even know what to do with them: $35 trillion is equal to the economies of China, Japan, Germany, India, and the UK combined. And as a result, we really can’t fail, because the consequences are unthinkable.”
He added a little more context, “That number could be $50 trillion if things don’t change.”
Unchecked debt weakens nations and leaves them vulnerable to crisis, he elaborated.
“You can argue, by the way, that when you’re living under a pile of debt, it can lead to catastrophe. I would argue to you, there’s a terrific argument to me, that the debt that Germany took on after World War One actually led to the emergence of Hitler. So I know we talked about debt in the economy and money, but it really does relate to politics and the rest of our lives,” said Sorkin, who is now writing a new book about the 1929 crash called 1929: The Inside Story of the Greatest Crash in Wall Street History.
He added, “We need to prove to the rest of the world that we have a plan and that it is do-able and workable.
I was ready for some more bubble bath at this point, but alas, he instead added, “We are in a moment that business executives feel like they can’t say what they think. Nobody’s going to be willing to speak out. That to me is the true danger. If we do have this financial crisis, what happens then?”
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