Monday, February 9, 2009

Some Delayed Thoughts On Kanjorski's Interview

Many people have written me with thoughts on Kanjorski's lack of traditional political evasiveness as demonstrated by his C-Span interview. Whereas most are opinion based, and the last thing Zero Hedge tries to do is change people's opinions, one thing seems to be evading most. And it is the fact that capital markets now have the capacity to (self) destroy in a matter of hours if not minutes, once a Gladwell-esque Tipping Point type of self-preservation meme becomes dominant. This is not insightful per se, or rocket science either, but it is cautionary as the market seems to have significant optimism embedded in what D.C. will be leaking over the next 48 hours. As optimism quickly transforms to realism, and maybe outright disappointment, it is feasible that people will push the withdraw cash button again, leading to another electronic bank run, and this time not even the implicit government backing of the reserve fund will stop be buck from breaking.

Scouring the blogosphere and "reputable" media over the past week, the prevailing thought is that the government is in a Catch 22: For any plan to be successful it has to be simple, transparent and to the point. That, however, is an impossibility due to the fact that not even Wall Street can visualize all the far reaching impacts of the combination of a concurrent stimulus bill and financial system overhaul, which implies that by design any proposed plan will have to be contextual, complex and consistently transformational, as evidenced by how the TARP morphed thru two and a half iterations. It is easy to throw taxpayer money at a burning economic flame. However, to use a medical analogy, wanton use of the $$$ printing press products will merely fight the symptoms, not the underlying cause.

And as many angry readers will immediately interject with "So what should we be doing then?" I will address that promptly... I really have no clue. To paraphrase David Faber earlier on CNBC, it is not in my paygrade to propose a solution. And in all honestly, I have no clue what could possibly work at this point. Many have shared their thoughts on how the problem can be fixed... (for most use, another proposed by Phil's stock world today) I have read lots of these ideas, and still do not believe that any of them will be effective, either uniquely or in combination with other proposals.

Alas, the U.S. has dug a very deep hole, and while it has a shovel, it is also in the hole... we can dig deeper but how do we dig our way out?
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Anonymous said...

What seems so incredulous and beyond rationale comprehension is a near total absence of public dialogue about THE TRUTH of current financial events. There is an eerie silence. The public admission of Rep Kanjorski of Sptember 08 run on the ranks via computer terminals is unheard of in such a public forum and by a reputable persons - yet no headlines - no exploration of the implications to the public at large of this event and the potential of future such events. The notion of a DIGITAL BANK RUN deserves,discussion,exploration, amplification -- but silence. I truly not not comprehend the psychology of silence of the moment. FEAR? dgj

Anonymous said...

Will talk to myself on comments -- WHY. Why will no one do this simple math. Add the existing USA debt (fact) $9.4 trillion and add the total recent funding commitments of $9.7 trillion - total $19.1 trillion debt and contingent obligations of the government and citizens of the United States. Why is no one screaming about the implications of that simple math? Words have not been invented to express the chocking implications of such a number. WHY ? dgj

Anonymous said...

No one wants to be the individual to yell "FIRE" in the crowded movie theater, unless you're the one seated right next to an exit. In this case, no one knows where those exits are.

Anonymous said...

confidence and trust are what we need.

the federal guarantee of mmkts was long over due. that put confidence back into mmkts. obviously not the same amount of confidence as in the past, but it has been enough to stop another run.

maybe it just takes time.

confidence and trust take a long time to build. (time also breeds complacency, and thats not why i think confidence will return)...rather, like the SEC acts of the 1930's, we (the global powers that be) will work to diffuse systemic risks. investors (humans) need time to make sure the system works. so while the imminent announcement is probably not the cure all, its another step that shows the world is committed to the fight to regain trust and confidence.

Harleydog said...

First off, absolutely great blog !

I know this is simplistic but then again, that's what I understand... How about simply doing 'nothing'! Besides the fact that we are in no positon financially to do anything anyway a financial hypocratic oath might be in order.

Prudens Speculari

Anonymous said...

Anonymous said...
"confidence and trust are what we need."

Yeah yeah. Truth, justice and the American way.

1) "I never took steroids"-Truth
2) I didn't pay my taxes and now I'm head of the Treasury- ------------ Justice
3) I guess this is the new American way.

Whatever you're smokin, I want some.

Anonymous said...

I have dug many a hole before, both physically and figuratively. The way out? Dig at the sides. That is, attack the immediate issue - the wall that is preventing you from getting out.

Our immediate issue is debt. So it has to be destroyed. How do you destroy it? Sell it off at bargain rates to people who can use it and make a profit from it. This implies something that is difficult to deal with: DEFLATION.
However, with the right mix of monetary and fiscal policy (no, not the mix we're reading about today on 2/10/09) the deflation can be limited and not corrosive.

Either way, there has to be pain. We can do it the quick, easy, and painful way....or we can do it the long, drawnout, painful way. Either way, there is pain, but the question is how much can you stand politically? Obama cannot stand pain, that is evident. He wants to draw it out and make it bleed. But the leeches he is choosing to apply have been proven time and again to fail - just as his predecessor applied failed concepts. Politicians never learn.