The Mets, Yankees, and the Absurdity of Economic 'Contagion'

While the New York Mets have had some great teams, some World Series Winners (1969, 1986) and some of the most talented players baseball has ever seen (Darrel Strawberry, Tom Seaver, and Mike Piazza, to name but three), the franchise’s overall history is one defined by persistent dysfunction.  Even the best Mets teams from the late ‘80s were viewed by some as the “worst money could buy.” This year’s team unsurprisingly sits over sixteen games behind Atlanta in the NL East race.

So strangely bad are the Mets in 2018 that their ace pitcher (Jacob deGrom) might win the Cy Young for losing as much as he wins.  Yes, you read that right.  Even though he has a 7-7 record thanks to terrible run support, deGrom may be awarded pitching’s highest honor at season’s end for being so stingy with runs amid his own team’s offensive (get the double entendre?) futility.  Only a Mets pitcher could pull off this rather odd distinction. 

Less than 10 miles away from the Mets’ Citi Field sits Yankee Stadium.  The Yankees are arguably everything the Mets are not.  As opposed to dysfunctional, the Yankees are conservative.  Management doesn’t even allow its players to grow beards.  All that plus the Yankees win, and have been winning with great regularity for quite some time.  The franchise can claim 27 world championships.

The wide gulf between the two teams came to mind while reading about the economic problems that Turkey is presently experiencing. While the country's problems are real, the reporting on them has been thoroughly ridiculous.  As readers well know, much of it has included the absurd suggestion that problems in Turkey could somehow “spread.” Witless reporters easily gulled by market pundits endlessly searching for relevance have attached a frequently-used descriptor to the goings on: “contagion.”  Supposedly Turkey’s economic struggles could lead to “contagion” that may have a negative impact on economies and markets around the world.  Readers should dismiss what’s laughable. 

They should take “contagion” as seriously as they might the idea that the Yankees should suck because the Mets frequently do.  No, the Yankee organization is defined by stability and function, which makes it the opposite of the Mets.  Implicit in “contagion” is that the Los Angeles Lakers are regularly awful simply because they share the same arena as the Clippers do….

Important here is that what entertains us also instructs.  Just as no serious person would suggest that the proximity of Cleveland to Pittsburgh means that the Steelers will increasingly resemble the Browns, neither do economies “infect” one another with what ails them.  That’s the case simply because economies are just people.  And when people are broadly free from bad policy, they tend to progress. 

That’s why San Diego has never much resembled Tijuana, even though the two cities are less than 20 miles apart.  Looked at more broadly, the latter also explains why California and Texas aren’t poor even though each state borders a country (Mexico) that most Americans would view as corrupt, badly governed and poor. 

Considering locales within the U.S., Newark, NJ is the last stop before New York City’s Manhattan on the Amtrak train, but few would mistake Manhattan for Newark.  Manhattan is the “final test” for the talented per Ken Auletta, and is the picture definition of rich.  Its prosperity is in no serious way threatened by the lack of prosperity in Newark, even though they’re so close.  Just the same, the fact that Louisiana borders Texas in no way signals looming problems for citizens of the Lone Star state.   What goes for cities and states also goes for currencies.

Switzerland borders Germany, but it’s not as though the franc collapsed to nothingness alongside the mark in concert with Germany’s hyperinflation after World War I.  So-called currency “contagion” similarly didn’t reach England.  Figure that England’s pound was defined in terms of gold, which means England had a monetary policy totally separate from that of Germany.  Though the mark fell to less than a four billionth of the dollar, the pound was stable.  It didn’t lose value until 1931, when England left the gold standard. 

Assuming Turkey wants to right its currency, it could peg the lira to the dollar, euro, pound, or any other currency that’s globally accepted.  Quite a bit better, it could peg the lira to gold.  Money is just a measure.  Nothing else.  It works best, and trade and investment are most frequent, when a currency is stable. 

In short, readers would be wise to ignore the pundits and press as the story in Turkey develops.  So long as U.S. economic policy remains broadly non-interventionist, and the non-intervention extends to financial institutions that might be perilously exposed to Turkish debt, the U.S. economy will be fine.  It’s only when policymakers intervene, and commit egregious errors of the bailout variety, that ill economic health spreads. 

So while “contagion” is not a serious concept, government intervention is.  That’s why readers would be wise to ignore what’s happening in Turkey, while not ignoring politicians, regulators and central bankers eager to respond to what’s happening there.  People can never cause economic “contagion,” but witless politicians certainly can.