Hi Elmat, <<The biggest company bankruptcy and the biggest default in history back to back and the system is being left standing>> … You left out the words 'so far' after 'biggest' and ‘still’ following 'standing'.
What is happening in Enron and Argentina is in fact happening, fractal scaled up, on a more pervasive and thus less detectable scale, with necessarily slower velocity, around the world. I do not expect the system to collapse, but I do expect there to be more record breaking shocks to induce catastrophic rhythmic frequency resonating cognitively in the system to the point of almost collapse, stimulating the governments and media to even more concerted but perhaps more sincere round of rearranging the chairs.
The crux of Enron affair is the hollowing out of productive assets in favor of financial manipulation, the replacing of steel with paper, the transformation of substance into spin, all in the name of new age productivity increase, shareholder value and deregulation. The spices that destroyed the dish were age-old greed, debt, and the sudden disappearance of confidence.
The nitty-gritty of Argentina episode is spending beyond means, borrowing afar from need, sacrificing retirement savings for current consumption, and the adaptation of easy and spin-able recipes (dollar peg, dollarization) in lieu of working with discipline, prudence and personal responsibility. The herbs that ruined the course were, oops, the spices mentioned earlier, age-old greed, debt, and the sudden disappearance of confidence.
These are the same crock of poisonous brew that dealt a harsh night to the faithful and believing customers during the Asian Financial Storm. Let me get you in on a secret, the Asian Financial Crisis prologue to the current play had little to do with ‘lack of democracy’, ‘cronyism’, or ‘absence of transparency’, commonly summed up by WSJ as “‘failure of Asian values”. The still on-going but now tepid crisis had everything to do greed, debt and the lack of confidence, generally understood by me as “failure of human nature”.
Let me get you in on another secret, the Japanese are not spending money because they do not see much opportunity to make more wealth, had a bunch of what they thought they had flushed out with the foam and fizz, the afterbirth of the bubble, in five to six hallucinogenic recovery rallies. Japan is not suffering because they are inflexible or rigid. They are suffering because they are slowly going broke, as in assets are being overwhelmed by liabilities, current and future, and are justifiably scared, especially upon realizing that the Central bank liquidity deluge and Central government fiscal spending has not been able to raise the economic tide and halt the production (no, not productivity, but production) slide.
Of course, I am always mindful that I could easily be wrong, and Maurice (this is a test to see if Maurice actually reads my posts:0) could effortlessly be right, in which case everybody should be able to continue getting wealthy without trying, investing ad infinitum in abracadabras using ever copious amounts of printed paper, representing not so much wealth as obligations.
Maurice will be right, one day, but not likely in 2002, the year of the Global Financial Tsunami, a subject we may still be talking about 48 months from now.
Chugs, Jay |
