Is the current economic crises a "crises of confidence" or a "crises of structure"?
One might ask the above question of the existing debacle, both in Puerto Rico and the United States, whose answer will have important policy repercussions. Is the current economic crises a "crises of confidence" or a "crises of structure"? The 'irrationality' of the stock market tends towards policies which tend to boost confidence in the market, hence leading 'investors' into continued regular pattern of business activity. The markets snap back to their original pattern of continued growth, marking the existing debacle as the typical 'crises of confidence'. A "whew" with a sigh of relief is given, and individuals go back onto their regular affairs as if nothing seriously had occurred. However, one should not necessarily assume that this policy will always work. Its underlying presumption is that the existing eco-financial structure is relatively solid in its underlying foundations. If this presumption does not hold--if the problem is not just a crises of confidence but rather more profound underlying 'structural problems' (whatever these might be), then a tactic which typically brings the 'market' back on track may not have the desired effect. In this sense, we should take a bit of inspiration from the 1930s generation, which confronted the problems directly at their respective levels.