Musings 24 6/19/11
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For those who are new to the Musings: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books.
Doom and Gloom Is Good!
I was interviewed Saturday evening by guest hosts Paul Vigna and Ina Parker onthe John Batchelor WABC radio program, and the topic was (unsurprisingly) Greece. Both Paul and Ina asked good questions, and so my primary aim was not to ramble too long or incoherently. Who knows if I succeeded or not; I prefer the solitude of writing to being interviewed, but Paul reassured me the segment would be short.
One of their questions spoke directly to the core issue: "If Greece defaults, what happens next?"
I answered that Greece goes through a re-set, a painful but brief period of adjustment, and with the bad debt gone, then the economy would be cleared for new businesses to take root.
The world does not end. Life goes on. We were threatened and bullied in 2008 that the insolvency of the U.S. financial sector would trigger the end of civilization, but it was just another lie: life goes on.
The "doom and gloom" view (of which I am proponent, I suppose) is typically categorized by the Mainstream Media as a stubbornly negative prediction of the "end of the world." While there is certainly a contingent who espouse that, in my view "doom and gloom" is not predicting the end of the world, just the end of the Status Quo.
That's a key difference.
A lot of my thinking revolves around finding analogies which illuminate complex situations such as Greece and its debts.
I would liken the whole Greek drama to finding your cholesterol level has climbed to 300. Normal is 180. That 300 reading is bad, and increases all sorts of health risks.
The European Union and European Central Bank (ECB) have managed to lower the readings to 295 with massive injections of money. They declared that tiny drop a "success" and the market bought it for a year. But now the world is awakening to the fact that normal cholesterol is 180, not 290, and so the ECB has only prolonged the crisis, not solved it.
As we age, many of get these kinds of warnings. We thought we were eating pretty well, and getting enough exercise, but that turned out to be wishful thinking. So we go through a period of adjustment to the new reality. Sometimes the adjustment period is wrenching. People have to give up much of their lifestyle. Denying reality doesn't help, and bemoaning the loss and the pain don't help, either; they actively hinder the adjustment.
Many of the most accomplished people I know have gone through serious troughs in their finances, careers and health. People lose their wealth, they adjust. They lose their successful jobs, they adjust. They face health crises, they adjust. This kind of wrenching adjustment is "situation normal."
To mention one celebrity example: a few years after reaching stardom as Captain James T. Kirk on the seminal series Star Trek, William Shatner was divorced and living in a camper, taking odd jobs to feed his family.
What the Mainstream Media and the Status Quo Powers That Be are implicitly claiming is that there should never be any low spots or crises in life; it should always be a smooth and uneventful rise in consumption.
The irony here is that many "doom and gloomers" welcomed the 2008 financial crisis as a much-needed opportunity to cleanse the system of bad debt and institutionalized fraud. it was the Status Quo that freaked out and declared the end of the world was upon us if we let the 'too big to fail" banks fail.
Once again the "doom and gloomers" foresaw that the Status Quo in Europe was simply not sustainable. They were derided and mocked as "overly negative." Yet now that the moment of adjustment is finally upon the EU, it is the Status Quo that is declaring the world will end if Greece defaults and exits the euro currency.
Whatever Greece does, it should protect the interests of its citizens. Clearly, accepting reality would lead to immediate default. If you have to lower your cholesterol by 120 points, then injecting $100 billion euros just to drop it 5 points makes no sense.
Humans need time to accept new realities, and to make the adjustments. I am sure we can all think of unwelcome news we've received that required major adjustments.
I just got through the fourth and last gum graft I needed to save my teeth. When I was told about a year ago this painful and costly treatment was necessary, I found it depressing: gee, I really am getting old, etc. As for financial anxiety: that has been my constant companion through most of my life, as I've been self-employed most of the time. What amazes me is not financial insecurity, but the notion of getting a paycheck which continues to arrive regardless of what happens in reality.
I have already discussed the causes of the bad loans in Greece, but at this point it's like talking about the diet you consumed that caused your cholesterol to skyrocket. It is a point of reference only, and a useful guide to the adjustment to a healthier lifestyle.
It would be better for all involved if Greece defaulted 100% and left the euro currency. Imports would instantly become very expensive in the new currency and so Greece would have a chance to build a balanced, productive economy that wasn't dependent on debt. All the banks who made the predatory loans to Greece would go bankrupt, and good riddance to them all. If the ECB also goes under, that would require some painful adjustment.
But life goes on. "Extend and pretend" only prolongs and deepens a crisis. "Doom and gloom" is the recognition that new conditions apply and the old way is unsustainable. Nobody likes hearing that, but it is the only way forward.
The disaster isn't default, it's trying to avoid the inevitable with tricks and games that only make the crisis worse.
The Dollar and the Euro
As you know, I have been calling since April for the U.S. dollar to rise substantially. For this I was mocked as a mindless contrarian and a danger to my readers, among other things.
Now we are poised on a major re-alignment of the the euro's perceived value. If the euro declines to parity with the dollar, a move I fully expect, then there is no way the dollar can decline as the euro falls 40%.
When I visited Europe in 2004, the euro was slightly below parity. The world did not end as a result. If the euro declines from 1.42 to 1.00, the world won't end. A period of adjustment will occur. Those holding dollars will gain purchasing power and those holding euros will see their purchasing power decline.
From Left Field
potential therapeutic properties for the metabolic syndrome (diabetes)
Installing Economic Recovery....
44% Installation Failed.
Please try again. 404 error: Recovery not found!
Thanks for reading--
charles
