Wednesday, September 23, 2009
Burning Down The House
I am, in a strange sort of way, sorry to see the "recession" leave so quickly (if it indeed is leaving us). Not that I find subdued traffic, diminished restaurant queues, and elastic pricing unpleasant, of course, but I do not wish more suffering upon fellow citizens than necessary. And I understand that large complex processes (such as humanity's combined economic activity) are difficult to attenuate in the best of times, and that in the heat of the moment, faced with what was a quite real threat of systemic collapse from loss of confidence, the cost vs. benefit of letting the house fire burn itself down vs. the quite heightened risk of the fire spreading IMHO justified action. We can quibble about the details, for I am no apologist for four-letter financial program acronyms that give away our collective money without extracting an appropriate slice of flesh on our collective behalf. However, I just have a gnawing feeling that the "recession" (as perhaps did each post-1981 recession) left much of its work unfinished. Leveraged spec still rules, and what wasn't killed one might argue, is perhaps even stronger. Despite falls in counsumer credit, overall credit growth (according to David Pearson) remains positive as Feds have picked up the slack (for now). Little in the way of debt-to-equity conversion has been been realized. Aggregate energy use remains profligate (and likely unsustainable) contributing to the still-sorry state of America's current account, which is bloodier-red than Omaha Beach in 1944. Expectations of what IS, what should be sustainably normal remains elevated; real estate agents (and stock brokers) are as ubiquitous as ever, and the People still have no clue that they ARE The State. Employing the house-fire analogy again, it's as if the flames were nipping at the home of the despised and uncivic-minded neighbors, whose children were the neighborhood bullies, who neglected their property, free-rode upon others' initiatives, and whom most would have been happy to see depart - even under such beastly incendiary circumstances. But now, with the fire extinguished, the smoke has cleared and the damage is such they will be staying, so long as their Prop-Cat insurer stays afloat and makes good their claim). Perhaps they will be slightly chastened. Perhaps they now will tend to essential electrical repairs, remove the rusting hulks from the yard, and their children might no longer smoke in bed. And so this recession leaves the proverbial house uncleaned, excess capacity unremoved, less-than-competitive enterprises continuing to pursue less-than-successful practices, corporate rent-seeking run amok, specs (even those who flamed-out spectacularly) unchastened, and hubris emblematic (ironically through the good graces of the very public saviours now-scorned by those emboldened [again]). Though I do not deny that I possess a curmudgeonly streak, this feeling is not mean-spirited, but just Calvinistic. As such, perhaps we should endeavor to collectively expend an appropriate effort upon BOTH the qualitative nature of growth, and the quality of down-cycle, each unnatural and akin to using one's weak, opposite, hand. It isn;t pleasant, but it is decidedly useful in the longer run.