Right after the Great Depression (2008), the public started to pay greater attention to the significance of monetary policy and fiscal options used to assuage the damage wrought by years of speculation and excess. A combination of tax-cuts and lowering interest rates were supposed to stimulate both enthusiasm and spending within the global, and domestic, economy.
Unfortunately,
most post-apocalyptic research indicates that policymakers were operating in
the dark, basing their assumptions and actions upon anticipated results rather
than an empirical knowledge foundation.
Of course, for many in our generation we had never "been
there" before. What happened, however,
was an acceleration in share buybacks and speculative stock purchases by a
handful of investors who now had access to "cheaper" money.
Thus,
we are now looking at a stock market that is statistically too extended and somewhat
unfair in its distribution of profits and capital gains.
Why
is it that our leaders had so little knowledge about the unintended
consequences of free money and asset bubbles?
Is the market's dramatic turnaround a product of refining prudent
corporate governance, or simply an end result of additional unbridled
speculation?
To
a large extent, we are becoming once again the sufferers of a Wall Street morality
that historically has said, "as long
as it's working, let's not mess with it." I find
it interesting that the definition of "what's
working” and "who it's working
for" is somewhat inconclusive and certainly not woven into any part of
a moral allegory.
In
Wall Street's vernacular, money triumphs, no matter who gets trampled in the
process.
"As
long as the markets continue to go up, there is little reason for analysis of
its constituent elements", many would
reason. But it is interesting to note
that history does tend to repeat itself, and asset bubbles always seem to
collapse "unexpectedly".
I
am not suggesting that we presently have anything to worry about, nor are we on
the precipice of a 2008-like disintegration.
But we do know that when markets have historically been most robust, there
has also been commensurate intensity of demand,
profitability, and consumer confidence. Right now, we are rather shallow in all three
of those factors.
Decisions
pending
Has
the Great Recession been voided altogether, resolved beyond all doubt? Of course not. Otherwise, the markets would be perfectly in
balance, immune from further possibility of erosion or surprise. Instead, we should agree that there is a lot
of work to do to enhance our comprehension about structure and solutions to
this, and other, financial crises.
One
can only hope that political discord doesn't continue to stifle that endeavor,
or any initiatives that might propel equitable outcomes for all who wish to
participate in the promising economic largesse.
We are all optimistic that politicians live up to their oath to use
their authority sincerely to influence the lives of their constituency
positively. Politicians know a lot about
how to get elected, but they give the vibe that they have less capacity in
knowing what to do once they get there.
Economists,
strategists, and theoreticians are not in the business of making policy or
telling the markets how to work.
Instead, we analyze how and why they are working, and inform our
clients about trends and probabilities of future performance. But if we all were to ask the right questions
and measure the results in the right quantities, we might be able to presage some
of the excesses and inequalities which inevitably will occur.
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