Monday, December 03, 2007

Speaking of Coyotes

On the subject of Wile E. Coyote, Paul Krugman must surely win the award for best economics metaphor for this effort at explaining why and when crashes occur:

So, according to the story, one of these days there will be a Wile E. Coyote moment for the dollar: the moment when the cartoon character, who has run off a cliff, looks down and realizes that he’s standing on thin air – and plunges. In this case, investors suddenly realize that Stein’s Law applies — “If something cannot go on forever, it will stop” – and they realize they need to get out of dollars, causing the currency to plunge.

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