The surreal life
So here we are. Three years into the global economic catastrophe of constantly shifting nomenclature and things are so utterly normal seeming that you often can only catch glimpses of lurking disaster out of the corner of your eye or as a reflection in a store window. We’ve inoculated ourselves against the fear of financial apocalypse through countless close brushes that yielded only minor discomfort. We’ve learned to cynically laugh off talk of green shoots as pie in the sky dreaming from people who think the Dow is moved by something other than the price of the dollar.
I have gotten so used to living in this state of uncertainty that when I force myself to step back and honestly asses where I think things are going my mind reels. It feels like we are destined to either end in tremendous cataclysm or possibly find our way out of this mess, but when I look around things are suspended in stasis in between the two outcomes. Global leaders are spending all of their energy on maintaining the balance rather than on finding a way out.
I imagine that this is a dim shadow that still contains the rough outlines of how life felt in the depths of the cold war when the world stumbled from one brush with nuclear annihilation to another with the end never actually arriving. This reality shear is further exacerbated by the fact that we are being asked to accept that all possible solutions lie in the hands of the very same governmental regulators and financial institutions that got us here. It has become very easy to take any group of news stories and fail spectacularly in attempting to reconcile them with what we know to be reality.
Because of this persistent state of existential uncertainty I think that the term “The Great Recession” does not come close to doing justice to the place where I find myself every day. I think that in honor of the forthcoming second anniversary of the Bear Stearns collapse we should rename the ongoing threat to global liquidity “The Cold Depression.”
The Cold War is an interesting analogy to the current economic situation.
If you went back as early as 2004 and analyzed the language of the economic commentators that accurately foreshadowed the subprime meltdown- not the pundits who spew soundbites on CNBC – and replaced all instances of the word “subprime” with “Greece,” “PIIGS,” or “sovereign debt,” I think you would find some disturbing similarities with what’s being written today.
The feeling that there’s a slow-motion but impending train wreck…
The confident reassurances by Lehman prior to the collapse that no assistance was needed…
The confident reassurance of the Greek PM that aid is not required…
The general feeling that the US Treasury lacked a plan when it bailed out Bear Stearns but let Lehman collapse…
The vagueness of the EU’s “plan”: “Euro area member states will take determined and coordinated action if needed to safeguard stability in the euro area as a whole.”
The Cold War analogy works well. As Barron’s points out, sovereign debt issues transcend economics and impact the world of politics.
Nice article. They missed one piece of it though. The Chinese have an interest in keeping the dollar from appreciating. Since the RMB is pegged to the dollar, and Chinese individuals and companies have gone on a state fueled RMB denominated borrowing spree, if the dollar and RMB move up, then a lot of Chinese debtors will need to be bailed out. Chinese monetary authorities want to unwind their stimulus measures on their terms, not the global market’s.