One of the things I’m surprised about is the resiliency of the economy. Things are flattening out, opportunists are making their moves on low prices in many industries. Business is starting up again, mostly because credit is beginning to flow out of the banks.
I really thought it would have been much worse. Given the environment of the crisis, regime change in Washington being the largest and most disruptive, I would have thought by now the pavement would have been fracturing, buildings collapsing, that there would be revolution in the streets.
I said this to Shannon yesterday as we walked cross town on the way to a meeting of one of her non-profit groups that works with disabled vets, and she stopped cold in the middle of Park Avenue.
“You? I can’t believe it. I just read this ‘the world is coming to an end because of the liberal fascist government’ article in the financial analysis reports we get at work, and I wondered if it was you ghost writing. I can’t believe I’m hearing this.”
“Nope, not me. Those guys, making those kinds of predictions, are applying the rules of the market to the economy. That’s not how it works. Sweetie, let’s get out of the street or none of this will matter.”
“You were Mister, ‘It’s all over! To the hills! Only Idaho is safe from the collapse!’ just a week ago.”
“If there is anything that we have leaned from this mess – besides that banks are the most important part of the economy, and that when the wealthy stop spending, businesses of all sorts begin to fail – because the big money began to pull back in, what, 2007 right? – is that all that stuff we did installing systems, processes, and people designed to produce flexibility in corporations, it really worked. Hey, I was surprised at how fast the economy tanked when spending shut down, which really was a result of that flexibility as well, and I’m surprised at how fast the up-response to opportunity is occurring, flexibility in the other direction.”
“So it’s all about you?”
“Of course. Always has been. What time’s the meeting?”
“Seven, we have plenty of time to get there…I don’t think anyone is ready to call a bottom,” she said. “Nothing is really going up yet. It’s just not going down as much.” Harvard trained people like Shannon always have vast facts at their command, so you don’t challenge statements like that for fear of being humiliated. Sensing this I repositioned to an area where she couldn’t challenge me, my cosmic connectedness and zeitgeist reading faculty, supported by unassailable analogy.
I said, “No it’s not, but you can feel the new certainty in risk taking areas of industry. Seriously, don’t look at me like that. You can feel it, I mean, I can.” I put my hands out over the crowds on 67th street, like Moses speaking to his people.
“Don’t do that. It looks strange, and you’re scaring people.” She was right, Most of the people on the street looked tired, and the outstretched arm thing was giving them the willies.
“Look, economies,” I said, “are not like markets. Markets gyrate up and down, overnight. The random walk, revert to mean, madness of the crowds, tulip mania, attention span of a gerbil nature of them means they’re prone to boom and bust. But economies are more like giant whales, they are great graceful beasts that move in huge arcs. If things are starting to flatten out, and the vectors are just a bit positive, then there is momentum that will continue.”
“Yea, but that could just be a dead whale floating up with trapped gas in its belly from decomposition.” Dam she is a smart one. Countering me on my analogy front. “So, what you are saying is, Obama gets credit for the greatest save in history?”
“Certainly he will take all the credit. But the reality is, all this is happening before the Obama money shows up. Right? None of those trillions in payoffs to friends of ‘The One’ has hit yet.” I was shifting ground to politics.
“Now, now, he has to get credit. Great leadership and proper English syntax is important. He has been a steady hand in a time of crisis.” So that’s the new criteria for leadership? Being able to look good on TV? Larry Summers is a Harvard guy too, I thought, and pressed on.
“So all that money that’s going to the political supporters of the Dem’s in the last election, that trillion dollars, that the kiddies will have to pay for, will come in on top of this upward moving economy. The risk is just what every economist has said since Keynes: Fiscal policy is always enacted too late to make a difference in a recovery, it causes over stimulus and sets up the next recession. I mean, a trillion dollars to Obama’s buddies is a ton of spending, and that kind of spending is like eating sugar candy. There is no nutritional value but you run around with ADD for half an hour before the glucose crash sets in. It’s not like this guy is out building infrastructure for the future, he’s making payments to union leaders and local politicians.”
“So, you’re not on the Hope Train yet, I keep telling you it’s time to get on the Hope Train. People are watching you know. I still can’t believe you’re off the Armageddon track, though. Why not the end of the world from run away Washington fueled inflation? All you right wing, back to the gold standard, wackos revert to that line, eventually.”
“I’m a pragmatist, not a wacko. These days, in the reflection of ‘The One’, we just look like wackos.” She was right about the inflation problem, but not the gold thing, that really is wacko, so I dodged the issue.
“The problem is political,” I said. “This guy just massively increased the size and power of the federal government. Inflationary? Maybe, but the middle class likes a little inflation, it lifts home prices and wages. Bankers hate inflation because it monazites debt. Obama is Andrew Jackson, he’s going to want a good head of inflation going. But the bigger issue is about control and who’s in charge. He’s attacking the private sector, trying to shut down the New York power base. The NY vs DC story goes back to Lincoln, if not earlier, maybe to Rome, and now DC is winning; which is bad news for the future, paragons of efficiency that these guys are. He has no qualms about using dictatorial control to make himself look good, and don’t forget this guy is all about image. I mean this thing with the auto industry was just embarrassing. They just ignored whole swaths of established laws and court decisions.”
“I was a crumbling, failing industry that employes millions. They had to take control.”
“So we decided that the archetype of world industrial efficiency, the Italians, would save us? Pittiful. That was like Obama’s bend at the waist bow to the King of Saudi Arabia last month. The autos should have gone into bankruptcy and joined the other great industries of our past that no longer exist, like mast timber harvesting, cod fishing, and whaling. And that’s the point. No elected politician is going to be anything other than Obama. This is as good as it gets, and I like the guy. He’s smart intelligent, crafty, devious, opportunistic, arrogant, strong and telegenic. But he ain’t nothing like all the people we know who actually run companies; none of whom could get elected to office, because they are so unique. We have let government get so big that our weakest leadership selection process – I mean didn’t the last election remind you of American Idol? – now can have a huge impact on our everyday lives.”
“So Armageddon’s not gone yet?”
“Economically I think it is. DC will try and stoke the flames of fear a bit longer, and the media has a momentum all its own. All those reporters who are fighting for relevance, who just learned what a derivative is, will still run stories for a while – wrong stories, but it’s all they have, now. But the banks are back, and there are new one’s forming from the flotsam and jetsam of the guys who got fired in this mess. Of the dozens starting-up, you only need one or two to make it to have a real impact. Here’s the sign: These Goldman guys, and Jamie Dimon, they are crafty, throwing the TARP money back at Treasury as they felt the clamps of the federal mafia close in. No, we’ll deal with the inflation and distortions from the Obama money, but no economic collapse, I mean through this whole thing China never dropped below 6% growth, and technology never really took a hit, and that’s where the action is. But that means that the battle will be over human rights and the role of governmental control; about these things, people take up arms…”
“Take up arms huh? Whew. Okay, now I’m feeling better, the old you is back. You had me worried there. Just don’t say anything like that tonight. These people are academics and they need to feel that they did the right thing.”
“Do I get a martini if I’m good?”
“Okay, okay, I promise, no Obamanomics reality talk tonight.”