Many Americans who have never driven in ol’ London town have driven over the London Bridge — in Arizona. I’m an outlier, here, in that I’ve been over many a London bridge, but not to Lake Havasu’s.
But that doesn’t make me an expert on the Shard London Bridge, a London skyscraper (yes, skyscraper) nearing completion. Popularly called “The Shard,” it will be the tallest building in Europe.
So prepare yourself: Expect a major economic collapse in the old country.
Yes, for the last century, the building of record-height skyscrapers could have served as a leading economic indicator . . . of disaster. As Mark Thornton explains, record-setting skyscraper construction is
a sign of a looming economic crisis. The model has successfully identified the Panic of 1907, the Great Depression, the Stagflation of the 1970s, the Tech Bubble, and the Housing Bubble.
In a scholarly paper on the subject, Thornton cautions not to use this strange correlation “as a guide to fiscal and monetary policy” or, superstitiously, an excuse to regulate “skyscraper heights . . . to prevent economic crisis.”
But the connection between building heights and boom-and-bust remains suggestive. Extra-big skyscrapers rise during extra-big booms, themselves fueled by central bank credit inflation. That is, inflation — and its usual consequences (which include unexpected deflation and financial collapse).
If only our central banks could maintain a stable money supply, rather than constantly tinkering with money to fine-tune the economy, our biggest buildings might not serve as such good predictors of our biggest economic downturns.
This is Common Sense. I’m Paul Jacob.