Tuesday, September 6, 2011

To The Lifeboats

In a post TARP world - there is no convenient political capital left to reach for. No blank check. No lifeline in the night. The markets can break the glass and sound the alarm - but to politically deaf ears. 

The political arena has become the achilles heel of the system in the event that interventive policy action is required to stave off outcomes many of its constituents are unprepared for or simply unaware of. To address these concerns, some will say deceptively, the recent political fall guy of central banker has attempted to circumvent much of the political branch that now finds its voting populace wondering why their economies and communities are for the first time in a generation worst off than their parents. 

It is my hope that they will not find out how much worst it can possibly get.

From the perspective of a taxpayer, a father, a proud American and a concerned global citizen - I understand their concerns and distrust wholeheartedly - I truly do. There are enormous holes in the financial system's design in how it rewards and penalizes its participants that has created the toxic political environment we swim in today. It is has become a classic and tragic example of a catch 22, yet one that I firmly believe the President could and still should disarm by leading the conversation away from political footballs such as class warfare and the blame game, to - "Where do we go from here?" - and "What needs to be done today." No one needs a campaigning President on a bus tour right now. This is a crisis in confidence that requires leadership - not showmanship. 

Most places I look these days I find an academic argument in a vacuum that lacks the reality, pragmatism and natural energy of what we have - an entangled and kinetic financial system that requires a form of altruism that has not been in our country's, as well as the worlds political dialogue, for quite some time. Today, just look at how most Germans feel about the European debt crisis and their own leading role to realize that politically it is an unfeasible task to deliver these reforms. At this point, it is unfortunately up to the unpopular hand of the worlds central bankers to provide the bridge through the crisis. I am not saying that the eurozone needs to be maintained in its current form, I have argued precisely against that (see Here and Here) since the beginning of this site. I am advocating that the strongest global bankers - both public and private come to the fire that is now ablaze because the political parties are unable to confront it.

This is and will remain our reality for some time - stretches of calm seas followed by treacherous conditions that requires a coordinated global response from its strongest members.

With that said, you could look at the situation as either a fools quest to the other side of the unknown - or the natural progression of a global community that seeks to align each others prosperity by also sharing their casualties. There are certainly dangerous ideologies on both sides of that debate and I believe most of us are completely unaware of what is at stake and what can be gained. It is in our nature to focus on the magnitude of the commitment rather then the big picture.

History is being written at breakneck speed and whether this chapter for Europe simply becomes an episode of either magnified or distilled risk will be dependent upon how well the strongest economies and their central bankers address the crisis in the coming days. Critics, cynics and armchair assassins have an almost endless well to drink from in criticizing the current situation from a tax, debt and even defense perspective. But like children, no one complains during the party - it is only after when they are asked to clean up the mess do they protest and look for an excuse to go home. 

Those of us participating in the markets from the sidelines are even more inclined to give our narrowed opinion on how to sail our respective ships. Do we bring them back into our protective ports - or continue exploring as generations before us have in the name of curiosity and progress? Certainly the owner's of those immortal ships made historic ransoms on the backs of those hard driven laborers - but aren't we collectively better off for it?

Unfortunately is not until we are within the storm and its strongest members are threatened with the existential conundrum that the lifeboats, now swinging gingerly from their davits - are even approached. Let us try and save those passengers and perhaps even the ship - it's contents are certainly worth the salvage.