Economics is a science in a constant state of flux. While it is true that any science is defined by its immutable laws, few disciplines are as influenced by emotion and perception as the science of “money.”
For example, we know how to
assert certain data about interest rates, or capital formation, or equity price
valuation. But do we really know how to
acknowledge perception of those data and its influence upon trends and
expectations? Might we consider that “capitalism
without customers” erodes all laws of economics, and that prosperity and
wealth, while measurable in dollar amounts, is only significant if it
represents a scale of opportunity that is shared by everyone? “Good times” are more than just the absence
of recession and bad news. It is a
commonality of experiences that is shared by a majority of the players in the
game.
It would be a very good thing
if the drivers of our current debate recognized that some people go to bed
hungry, homeless, or incapacitated in some way.
Down is up.
Usually, the strongest phase
of an economy is at the peak. We are not
at that point right now. As I wrote last
week, looking up from the bottom of a well is a quantitative “lay-up” for
reversal of a downtrend. In real terms,
however, the bottom of a well is a disaster.
We cannot dismiss the
pressures that joblessness places on an economy, or the hopes that citizens
have for finding some good in all the negativity. Our economists and politicians like to talk
about science and data. They do less, however,
about addressing the individual crisis that some of the unfortunate amongst us
must endure.
It is encouraging, for
example, to see Fed policy designed to ease pressure on interest rates for the
next few years. But the message is not
pro-active. “You can lead a horse to
water but you can’t make him spend,” is my catchphrase for arm’s-length
initiatives that do little to address the real problem: people’s concern for themselves, their
children, their aging parents, their neighbors and their country.
If you want to own a pristine
balance sheet, that’s one thing. Making
cognitive benefits for society is quite another. The message of the markets is too
unidimensional: up is up, down is
down. I would contend that the nuance of
that message is lost in translation to most people in their everyday
lives. The message of our last
Presidential election is that demographics are changing…and they matter!!
Crisis communication.
The core of this
“message-disconnect” is that what matters to most theorists is not always what
matters to social scientists. Somewhere
between boom and bust lies a shade of grey that is not all about the extremes (win/lose,
up/down, bull/bear) but about an advocacy which shapes the perception of the
time.
Wall Street has always been trapped
on the horns of this dilemma. Should it
promise a solution to people’s investment needs, or should it launch new
product initiatives to solve problems we didn’t know we had? Who can say that the financial market’s
product alchemy over the last decade has led us in the right direction? In the process of creating these synthesized
solutions, they banked upon our gullibility, our greed, our excess margin
(leverage), and our appetite for the garbage they proffered. It will take a long time, indeed, to sell the
alternative side of the equation, and to make it palatable to a large group of
people.
When we look around and see
how much “money” other people have, reconsider what standard of measurement we
really mean. In the aggregate none of us
is as poor as we might think, but no one “of wealth” has found all the answers,
either.
Psychologically, you are only
a casualty if you think you are one.
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