1 Boring Old Man

The Flimflam Strategy
By Eugene Robinson

Let’s see: The financial system is still in grave peril, despite Congress’s approval of an unprecedented $700 billion bailout. Unemployment is rising, the economy is slowing, and the question isn’t whether we’re in for a recession but how long and how deep the recession will be. Meanwhile, U.S. troops are still fighting in two places – Iraq and Afghanistan – where, as a rule, foreign occupations end badly. The terrorists who struck us on Sept. 11, 2001, have been allowed to regroup within the borders of nuclear-armed Pakistan and are busy plotting new attacks. Rarely have there been bigger or more urgent issues to talk about in a presidential campaign…

    … no matter how skeptical we are when we write about bogus allegations, writing about them at all gives them wider circulation. So when Palin questions Obama’s love of country because Obama knows somebody who did something unpatriotic when Obama was 8, our free-market ethos makes us rush to cover her every ridiculous word. We also find ways to convey that this is pure mudslinging and nothing but a cynical campaign tactic, but that doesn’t matter to the McCain campaign. What matters is that we’re writing and talking about this extraneous stuff – and not about the issues that polls say voters really care about…

With Bubbles Popping Worldwide,
No Wonder the Economy’s Gone Flat

Up to now, it’s been a financial crisis. This is a meltdown – an uncontrolled and largely uncontrollable financial chain reaction that threatens serious harm to the broader economy. The immediate problem is that the institutions that have most of the world’s free cash – banks, money-market funds, hedge funds, pension funds and major corporations – are hoarding it and won’t do the normal thing of lending to one another.

One reason is that many have taken on too much debt, lost too much money and are under pressure to use any spare cash to pay down debt and rebuild their reserves. The other reason is that they feel unsure about what they know about the financial health of other institutions and are afraid that some of them will fail.

So what we’ve got is a liquidity crisis that is bigger than anyone has ever seen, on top of an insolvency crisis that is bigger than anyone has ever seen. And thanks to the explosion of cross-border trade and investment, the crisis has not only gone global but now threatens to take most of the global economy into recession.

"World on the edge," is how the Economist magazine summed things up on its cover this week. And that is certainly how things felt during yesterday’s wild ride on stock and money markets. What we now have is a set of economic and financial bubbles bursting at roughly the same time…

Human psychology, is as soft a science as economics is turning out to be. It’s not that we don’t know anything about how the mind works. But, at best, we can only make our best guesses about how the mind of a person might react to something. The real proof is in what happens. And a wrong speculation has no enduring value. It’s as if every time we built a house, we were then waiting to see if it fell down as a way of evaluating our design. So, with our economy, all we can do is intervene, and wait to see how it plays out.

• There is, however, one piece of human psychology that’s in the realm of hard science – grief. There is a specific, unchanging way that the mind reacts to loss. While the variations are as individual as the ripples in a bubbling brook, the course of the stream is invariant. First comes shock, denial, disbelief – some period during which the mind tries to "un-happen" the loss. In the case of the Stock Market collapse and the endless ripples, we’ve all been right in the middle of that for weeks. In many cases, we’re still there. My money person is still using a phrase like "the business cycle." This isn’t "the business cycle," this is something else. It’s the first wrinkle in the fabric of the new global economy – and it’s a very big wrinkle. So, the first reaction of the mind is to say, "this can’t be happening!"
• Next comes sadness, depression, dysphoria – a longer period when the ramifications of the loss sit before us like a gaping wound. We see what we’ve lost, and that it’s really gone, and that it’s not coming back. In the case of this financial collapse, we see what a "bubble" is, and they’re bursting all around us [as Steven Perlstein points out in the second article]. Independent of what we think the problem is, who caused it, we are beginning to see the truth – the global economy has been built on sand for a while, and the building is falling down. Around us are only problems – energy, housing, global warming, trade deficits, the stuff that keeps money from moving. Suddenly, or so it seems, we are a planet of turtles pulling into our shells and slowing down. and we’re not happy about it. The party is over.
• The next phase of grief is anger. No synonyms here. It only has one name. While we’ve seen some anger around: Congressmen blaming other Congressmen; people blaming Wall Street; Ppople blaming their Stock Brokers. This anger has direction, some of it legitimate. The anger of grief is global, and it’s not here yet. When it comes, there are going to be lots of angry people. It’s not a good time to be a new President if you don’t like being criticized. George W. Bush has learned something about that. It took us a while to get around to that after 9/11 – partially because he deflected it with his wars. Let’s be mad at them. Neither he nor Cheney were "man enough" to withstand or contain our anger after 9/11, and it has cost us dearly.
• Finally, there’s a period of reconcilliation, "working through," acceptance  The world is reconfigured without being discolored by the loss. It’s just the way it is, now and there’s a new way of living required to be in it. It’s when things finally change and we have to live in the world as it is. It’s a long way off with the financial crisis, but it’s where we are with 9/11. Our problems are global now, whether we like it or not. We can’t just buy oil from the Middle East or allow a Trade Deficit with China to make us a nation of borrowers. George Bush and Cheney never helped us with this part.