There is a point or two, useful to be made, which the article most fails in making.
There's also an issue apparent with too broad a brush making the apples look like oranges, or visa versa.
If you want useful information... actionable information... you need to avoid the generalizations and focus on things with a more laser like precision... as choices, the outcomes of which depend on the real outlines of things, are best not made in a fog.
Useful, in your own thinking, to separate them a bit.
Scott uses "leverage" as a term in addressing an unwind... in a way that includes many things that aren't leverage, exactly... but lumping them all together is transparent as a form of advocacy... that masks what it is that is truly being advocated...
So, unpacking that... he's really talking about two things:
First, debt... or too much debt... and too much bad debt... debt as a good thing if used wisely, becoming a bad thing when it is enabled in being used wrongly, in excess, used by the wrong people, profligately, and for the wrong reasons. But, who makes the judgement... to whose benefit... as to propriety, balance, and the nature of the deviations in the eccentricity in each aspect ? As there has been a lot of money that has been made available to "invest" in a good number of ideas that are, economically, fairly tenuous... that's useful to sort out. Beyond the economics of shale oil (where it is perhaps not delusions about free market functions that should rule our choices)... some obvious bits: Printing money and using it... not to advance businesses in their focus on competition in core competencies... but to buy shares in a share price fixing scheme ? How deep do you need to dig to find error in that idea... or to find those who are responsible for it ? Also, that's a pretty typical result... as an outcome in markets... when money in excess is made too readily available to those with too little experience to have wisdom in its use... that when the error is exposed, there is a reaction not only in (at least posturing as if) "fixing" the error, but in pulling the reigns in, not only on those making errors, but generally... so it is not only the idiots who are punished by "the market" for the errors made by the idiots... and, instead, there is collective punishment... even while the idiots remain to rule.
Its as simple as teaching junior to drive... Yes, you need him to stay within the speed limits... but, although the first tendency in response to the eccentricity apparent in his management of direction control is "whoa, slow down there"... you don't really need him to slow down, which might create many more problems, both with his control and others reactions, you instead need him to stay focused on staying in his own lane...
And, to accomplish that... you correct Junior's choices, his focus, you address enhancing his situational awareness while attaching his responsibility to his actions... and the development of the physical skills required to make those connections without thinking... but you don't punish all the other drivers for the eccentricities in their reactions upon recognizing Junior as a danger... by forcing them to slow down... even put throttle limiters on their cars ?
And you don't put Junior in charge of deciding how the fix the problems resulting from his not staying in his own lane ?
Second, he's talking about leverage... debt and leverage are not the same thing... but there is obviously a relationship between them, in which risks and rewards are re-allocated... and amplified... in some context that relates to the willingness of the participants to divide them, and their ability to recognize and manage the risks ? Don't let Junior learn to drive a car, when he lacks the basic skills, by starting out in a top fuel dragster ?
In addressing debt I noted the tendency to "throttle back" everyone... when one driver (or a bad designer of freeways, etc.) creates risks or has an accident ? In leverage you see the same thing... only more so... as you will see the disparate impacts of realizing risks and rewards... generate winners and losers... with the losers advocating that it is obviously error to have allowed them to lose... so the winners must be punished... and the prize purse reallocated ?
That's what happened in 2008... bankers lost their bets... and you were forced to cover them... while they were left free to "try again... surely you'll get it right this time". Obviously, most modern bankers have never been to a carnival ... and been engaged to try their luck on the ring toss ?
Corrections are required, of course... but it is an error to correct things that aren't broken... to defend those that are...
So, when it is obvious what errors have been made, and who made them... you have a choice...
Either you don't let Junior drive until he's proven himself capable... and you apply changes that address the problem that needs addressing, including making him responsible for his choices, or, instead, you listen to the clueless lad and enable his choices as he explains the solution is "Fundamentally, we will change the way the economy works" ? |
