I really have had enough of this now and what little confidence I might have had in the world’s “leading” economists and politicians to deal with it has all but evaporated. I’m calling it “it” because I’m not even sure what to call it. What started with sub-prime became a credit crunch and then a banking crisis and then a recession and then a sovereign debt crisis and a double-dip. It was global, it was local, it was global again. It was Ireland and Portugal, then it was Greece, then it might have been Italy and Spain, then it wasn’t but then Greece was default then it wasn’t now it is but nobody wants to own up. You see my problem here, what is this thing called these days?
I’m driven to rant here after yet another ‘dramatic fall’ in the stock markets. Yesterday was a sea of red numbers. This morning the BBC website read “Shares rise after large fall” now it reads “Shares fall back after fears return” no doubt at the end of the working day it will read “Shares recover slightly after midday panic attack”.
This week is not unusual, the whole year has been like this. What hasn’t helped this week in particular is the drip feeding of bad news, seems like every day brought a fresh drop of acid for everyone to lap up, and the use of emotive language like “danger zone” (World Bank president) and “dangerous place (IMF head) helpeth not. There has been so much news and hyperbole that I have, frankly, given up worrying about it. Unfortunately, the stock markets in particular are not so relaxed and react to everything with their usual ridiculous and lightning fast knee-jerk. What I don’t understand is why those in charge of the stock markets can’t just “take a view” like everyone else and factor in the most likely outcome? For example, odds are that Greece will default, helped along by everyone insisting they will although most see this as the best option, not neccessarily bad news. The moronic stock markets watch the news the same as we do so they already have the same information, more in fact, and should by now have factored this in, they probably have, and yet I guarantee you that as soon as the headline “Greece defaults!” hits the wires the stock markets will nose-dive as if they had all been taken by surprise – “Greece defaulted – oh my God – who’d have expected this – run for the hills – death of the Euro zone – etc”. Can I say one thing – it’s pathetic!
Take a look at this analysis of Greece’s debt crisis from the BBC as an example of where we are today. They only have five possible outcomes, all of them bad apparently – pyrrhic victory being the best possible outcome and good old global meltdown being the worst. Global meltdown if Greece exits the Euro, a club they probably shouldn’t have been allowed to join in the first place? Give me a break. Is Greece likely to have a tought time in the coming years – yes. Did Greece get itself into this mess – yes. Does the global have to meltdown because of this – no. So why feed the boogy monster, BBC?
Enough about the stock markets, fickle friends that they are. My main beef right now is with the people charged with dealing with all this nonsense, primarily the politicians aided by economists, national banks, advisers and goodness knows who else is being well paid to screw this up. I appreciate this is a complex issue but they’ve all had plenty of time to analyse the matter now and yet they seem as hopelessly lost and clueless as they did when it all started. As every day goes by they prove themselves to be completely inept at dealing with this. A few things that strike me as not going well:
- Communications – coordination is completely missing leading to drip-feed chain reactions. Language needs to be controlled and measured, it is far from that. News emerges instantly leading to a lot of red-herring reactions before the facts are adjusted later in the day – surely a massive waste of time and energy.
- Biting the bullet – we must know enough by now to at least try to come up with an all-embracing, coordinated, solution that has at least a 75% chance of putting us back on stable ground and get some confidence back into the system. Nobody appears to be even close to such a thing, which means we all have to suffer through an endless string of half-baked ideas none of which are fixing anything.
- Regional / global thinking – this is a global problem and the solutions needed are at the very least, regional. I doubt very much this is going to be solved by the individual country approach we currently have. For example, this is almost certainly the time for full fiscal union of countries using or intending to use the Euro. I know that’s a tough nut to crack but God knows there’s enough incentive right now to take that bull by the horns and push it through. I agree with the USA, Europe does need to get its act together. Unfortunately, the USA needs to do exactly the same as can be seen by the market’s reaction to Operation Twist! Oh, and you can bet that even if Europe and the US do get it together that the following day we’ll have news that China and the East are nose-diving so can someone please include them in the overall plan?
- Timing – the difference in reaction times between news media, markets and politicians is absurd and causing problems. Things are happening so fast that politicians, apparently, cannot keep up. It’s like Tron versus Dinosaurs. Forget all the G7, G20 conferences and so on, what is needed is a SENSE OF URGENCY.
- Appropriate reaction – I think it was appropropriate for the first year or two but it is now increasingly not. I don’t want to draw parallels to wartime but that’s the closest I can get. I don’t think our politicians appreciate just how debilitating this is for us plebeians who are suffering the daily consequences of their inability to deal with this. I think they are more worried about their own problems, which added to their general lack of understanding of what the hell is happening means they spend most of their time like rabbits in the headlights. “Houston, we have a problem!” and we have one now, a big one, so when can we expect to see you guys setting up the equivalent of a war council, locking them in a room and not letting them out until this is sorted?!
How I feel about this is that almost any averagely qualified set of politicians, civil servants, economists and bankers can keep things ticking over and make a few tweaks here and there but it takes a special kind of person, or group of people, to deal with a crisis like this. So far, I have yet to see a single person in any country who has what it takes. It is possible there may be someone out there whose DNA does have trace elements of “the right stuff” but if so they are being held back either by bureaucracy or by a lack of good advice on which to act. That’s sad but not entirely unexpected.
The good news is that this cannot go on much longer. I do sense that the end of many tethers is nigh and that if those charged with administering US and European affairs do not resolve this, decisively and quickly, then they will go down in history as having failed miserably when their countries needed them the most, not to mention the end of their political careers. Surely that’s enough of an incentive for them to come to their senses?
PS – This BBC article published hours after my post suggests the tide is turning in the right direction. However, the inset video of Osbourne talking of the Eurozone as if the UK is completely isolated from it, is not the spirit of cooperation we need. I appreciate it might make good political capital for UK audiences but the UK cannot afford to let the Eurozone fail so if he’s such a smart arse then perhaps he’d like to help find a solution rather than stand on the side lines going “ner ner!”.
Twenty Degrees East 
“The right stuff” = higher taxes for millionaires and billionaires is the only solution. Everyone (in the elites) knows it, and that’s why it does not happen.
There is more than enough money in Greece or USA but it is on private bank accounts somewhere in the Pacific Ocean…or Dubai or in China (high-end real estate).
“Privatization of profits and nationalisation of debt and risk” is the character of our economy since 2000yrs..and more. Human beings are greedy by nature and usually a revolution or a war is needed, to re-establish a balance between “rich and poor”, “private and public”…It happened every 100yrs or so.
I doubt if there is anyone on earth who can effectively tackle the problem. Global interdependencies mean that unilateral action anywhere is impossibe. So even the most talented, vigorous and inspirational leader can never do more than argue with the narrow interests of the little men.
Anarchy awaits.
Scatts, it made me think of “If God will send his angels” by U2. The song fills me with some sort of hopelessness as well.
Wobbly stock markets. Oh, don’t go over the top, it hasn’t been like this since the beginning of the year. Markets rose till late April then fell back gently and the real tumble came in early Aigust. Bearing in mind that market participants were aware of the imminent US debt ceiling squabble and sovereign debt crisis in Eurozone, markets proved very resilient then. Regarding what’s been going for the last two months, treat it as I do – higher volatility creates opportunities to rake in some money – more on this tomorrow on my blog.
Oh, who said markets are rational? Markets are millions of small speculators bigger speculators, some investors (they’re not in the game these days) who press ‘buy’ or ‘sell’ buttons sooner than they think. If Greece defaults, even though everyone expects it, markets will plunge just becasue everyone think they should. Traders will be racing one another trying to (short-)sell stocks faster. I don’t know when Greece goes bust, but my advice for you, and for myself, is to buy stocks on the third day after the event.
Regarding your points…
1. Communications – to be drilled down tomorrow
2. Biting the bullet – no such all-embracing solution. It’s gone too far. We can’t put back the inevitable. A few bankuptcies are inevitable, let them happen, heedless of the consequences
3. Remember The Great Depression? Remember how states acted in that crisis?
5. Scatts, how do we feel the consequences of the crisis ourselves. If I didn’t risk my money on stock market and didn’t work at a bank I don’t think I would feel it that deeply.
I do sense that the end of many tethers is nigh and that if those charged with administering US and European affairs do not resolve this, decisively and quickly, then they will go down in history as having failed miserably when their countries needed them the most, not to mention the end of their political careers. If they deserve, let them step down in disgrace. I know maybe I’m too idealistic, maybe I’m reckless if I say tsunami should hit us, but haven’t learnt anything from the first wave of crisis, so maybe the second one could teach a lesson.
What I find funny is the idea that there are “people charged with dealing with all this nonsense, primarily the politicians aided by economists, national banks, advisers”. They have and are clearly known to have no positive controlling power over the economies, nationally or globally. I think there’s a BeeGee’s song saying “words are all I have” – not far wrong there. Not even the communists, whose powers you seem to hanker after, managed effectively. However, I am sure that you are right in that “the end of many tethers is nigh”: it’s called the economic cycle. The politicos will keep talking and making soothing noises until it deals with the problem for them.
I recommend regular viewing of something like CNBC Europe’s London morning broadcast over 12 or so years – economic decline through the boom, next decline and recovery to put it all into perspective and to make the whole thing much more day-to day fun. (How can you give the BBC any credence at all? OK, it may sometimes be good to know what the uninformed think.) Didn’t we all know the risks of creating the Euro? No surprise about something like the Greek situation happening. Wasn’t it hilarious that US opposition politicians claimed that they would stop budget agreement and were then shocked that the money markets gave them a kick in the teeth? I’m just amazed S&P had the courage.