I’m not an economist. Not even once. I have an interest in the field, as I’m sure a lot of curious people do, and I have on occasion showered someone with a, “If the Eurozone would only…” rant, which I know full well is unlikely to provide any kind of realistic, tangible solution. People far cleverer than me are spending their lives trying to solve the financial issues gripping the world, so anyone who thinks they’ve, “worked out the problem” has failed the grasp its enormity.
One thing I am quite good at, however, is looking and quantitative data and coming to qualitative conclusions. This represents a lot of what biochemical research begins as – you look at some data, see some feature or features, and suggest a few ideas which might explain their existence. By following this up with rigorous analysis, you try and confirm or refute your initial ideas.
I was looking over the S&P 500 index last week, and noticed the similarity between the current trends and those which led up to the ’08 crash. Today I looked again, and sure enough the similarity remains. To look (qualitatively) at how similar those trends are I superimposed the current financial trends onto those from three years ago. The results of that overlay is shown below;
Note that while some magnitudes don’t match up, qualitative spikes can pretty much be traced one-to-one. Some more overlays below.
With something as volatile as the stock market, it seems mapping at a lower resolution is largely pointless. However, at the scales shown above, we remove the noise caused by small, incidental issues, and simply look at the overall picture for the year(s). I’m not for a second saying you can project the 2008 crisis onto the next six months, but considering the current economic issues facing both sides of the Atlantic, this hardly fills me with confidence.