With great turbulence comes great experience. We learn most when we are shaken. For present discussion, these observations relate to economics and the markets. The most lasting lessons in this realm, the most vigorous studying, took place during times of uncertainty, when we were at our most alert; while times of stability put us to sleep, or sent us out partying. We could retrace our steps back to the Great Depression, which influenced much of our modern economic theory and which has served as a reference point for capital market fluctuation since. But there are more current examples to which we can point: The S&L crisis of the early ’90s that changed the corporate credit landscape and standard analysis of credit risk; the tech (a.k.a. Internet) bubble of the late ’90s that burst a few years later to teach us how to tell fluff from substance in innovation; and most recently, the consumer credit-led (a.k.a. real estate) collapse that taught us what “unlimited” liquidity really means.

In a sense, the period we are now entering is in proportion less perilous than those described above – and in some aspects even almost inconsequential – as economic growth is by all standard measures happening. But many are nonetheless nervous, neither sleeping nor partying, and this is for good reason. While the economic circumstance of stubbornly high unemployment, fragile property values, sovereign risks overseas, may run its course and pass like these things do, (this too shall pass), expecting the resolution to occur within normal boundaries of historical lessons is a deceptive and dangerous position. Despite possible appearances to the contrary, it can be argued that this time is not only more hazardous than prior times of crisis – due to the causes that lie beneath the surface, as described – but also different for the very fact that the hazard is underneath… a couple of steps removed, but stirring.

And the complexity of the environment this time around is also greater, the globe being a different place from what it was in Y2K. Correlations and multiplier effects that may have held ten years ago probably no longer hold in the same way. Consumer behavior is evolving all the time. Capital market reactions are influenced by a new set of standards and tools. Lastly, the impact of the crisis that just passed – unlike, say, the tech bubble that took place many years after the S&L collapse – is still being felt, has not yet been digested by the system. In short, if it was a good time to learn and adjust preconceptions in 1991 and 2001 and 2008, it is now positively great to do so, and is maybe even a matter of some urgency.

Without doubt, it will take a while to absorb new aspects and variants, and it could be years before the masters of academia, industry, banking, politics, really have it figured out. There is a risk that, in our age of instant results and instant answers, we won’t have the patience. There is a risk that, in this age of vast knowledge, we will be tempted to pretend like we know. But we don’t, the experience is wholly new, and the greater wisdom will be in observing this limitation. In this regard, it may be a positive indication that corporations are hoarding cash and that consumers are increasing their savings, despite being pushed to do otherwise by multiple sources. It is proof positive that there is wisdom in free markets, that common sense prevails outside the classroom, and that teachers may have good raw materials to mold.