Wheel of Fortune
From the archives: A year into the financial meltdown, the calendar keeps turning, and so does the economic cycle
Judaism is a religion of cycles. Most congregations read the entirety of the Torah over the course of a year, though some stretch it into three years. There’s the Daf Yomi, a cycle in which the learned plow through the Babylonian Talmud in a 7.5 year cycle. Its primary and secondary texts describe cycles in home life (Shabbat), agricultural practices (fields are supposed to lie fallow every seventh year), even in financial affairs (the forgiveness of certain debt every 50th year). Long before it was understood that the world rotated on its own axis while carving an orbit around the sun, Jews were schooled to believe—and know—that life is not simply a series of events that unfold in a linear fashion toward some unknowable future. There are breaks, ups and downs, and returns to the point of origin. As God admonished Adam as he was about to expel the first sinner from Eden: “In the sweat of thy face shalt thou eat bread, till thou return unto the ground; for out of it wast thou taken; for dust thou art, and unto dust shalt thou return.”
The High Holidays—and these High Holidays in particular—have been pushing me to think more about cyclicality. On Rosh Hashanah and Yom Kippur, we dust off the melodies, prayers, and tropes used only at this time of year. Simchat Torah represents the end of a cycle of Torah reading, and the beginning of a new one. Growing up in a large college town in the Midwest, it struck me that the High Holidays coincided with other vital cycles: the return of students to the college campus a few blocks away after a quiet summer, the turning of the leaves and onset of crispness in the air, displacing humidity. As an adult, the holidays inspire another type of cyclical activity—an annual visit to Sable’s, the hole-in-the-wall smoked fish mecca on Manhattan’s Upper East Side.
At work (I’m the business columnist at Newsweek and Slate), the fall—and again, this fall in particular—is always a period for reflecting on cycles. September and October are the periods when those in the financial world remind themselves that bad things can happen in the markets—because bad things did happen in the falls of 1929, 1987, and 2008. This year, the High Holidays nearly coincide with the one-year anniversary of the market meltdowns and ensuing bailouts. The High Holidays are the Yomim Nora’im—Days of Awe. But in Hebrew, nora means both awesome and terrible. And last fall, as Lehman Brothers failed, as the world’s financial markets seized up, as governments scrambled to stop a total meltdown, they were truly terrible days for the global economy.
The downturns in markets are cycles we’d just as soon forget. And yet, I can’t help thinking this year that we’ve been too forgetful of cyclicality—in our personal and professional lives. Had our leaders—and we as individual investors and consumers—been more mindful of the power of cycles, we might have avoided some portion of our current woes.
Until recently, an appreciation of cyclicality was deeply embedded in the way we thought about how the global economy worked—periods of growth followed by occasional contractions, which set the stage for more growth. But in the past two decades, the thinking changed. Technology, globalization, interconnectedness, improved management, and understanding borne of experience and the study of history gave us the impression that we could escape the tyranny of economic cycles. Alan Greenspan, elevated to chairman of the Federal Reserve in 1987, came to believe—and convinced us—that the business cycle could be tamed. And to a large degree, he was right. Recessions, which had plagued the economy every three or four years, became rare. Between March 1991 and December 2007, the economy contracted for a single eight-month period, in 2001. And even that recession was brief and shallow by historical standards.
A certain arrogance sets in among those who believe they live outside history. But that’s precisely what the financial world came to believe. As prosperity rose and spread, the prospect of a recession, of a cyclical downturn in the economy, or in markets like housing and stocks, was increasingly dismissed as an impossibility. Housing prices would always rise. Loans would always be paid back. The unemployment rate would always remain low. And with every passing day, more money was wagered on this belief that the business cycle was a thing of the past. When you believe prices move in only one direction, it makes sense to borrow (and lend) as much money as you can. The intensity of this belief made the reckoning all the more difficult when it inevitably came last year. The recession—the sudden reassertion of the economic cycle that began in December 2007 and probably ended this summer—was so devastating to the fortunes of so many individuals and institutions because their financial models didn’t account for the possibility of a downturn. It’s as if they had built houses astride an active fault that would shatter at the merest tremor. And so we should approach this High Holiday season with a deeper appreciation of the importance of cyclicality in worldly affairs.
Finally, for me, at least, the High Holidays—and Yom Kippur in particular—represent an antidote to another type of cycle: the news cycle. Journalists have always been captive to the relentless rhythms of world affairs. But in the past several years, it’s gotten much worse. Time was, a reporter could unplug in the evening, or for the weekend, without missing a beat. Now? Not so much. It’s irresponsible to turn off the BlackBerry and avoid email. Editors kick copy back in the evening, and sources in Asia may only be available at five in the morning Eastern time. Amidst the raging storm of Twitter, magazine deadlines, the mandates of filing for the internet, phoning in to radio shows, and rushing to television studios, there are only a few places you can seek respite from the datasmog: airplanes and synagogue. Yom Kippur is probably the one day of the year I don’t check my email or consume any media—regardless of which company might be failing or which television network is calling. It’s a time for reflection and humility. For at least 24 hours, the economic and news cycles can spin without my presence.
Daniel Gross writes about business for Newsweek and Slate.