Two height-terrified novice sailors hoisted me, pirate style, with a knife in my teeth, three stories up in the air. I, who couldn’t even qualify as a novice sailor, clung to the top of a swaying mast on the open seas to cut loose a tangled rope, rescuing a sailboat stranded 500 yards off the Texas coast. All of which leads me into the idea that you don’t have to be an experienced sailor to know storms can burst seemingly out of nowhere on the ocean. When they do, you’d better have a lot of experience, kick-ass equipment, or an angel to survive. There are parallels between this and what’s happening in the economy.
One of my degrees is in Geography, of which Climatology is a subset. Any fool with such a degree knows, ocean storms build over time. Complex interacting factors going on beneath the radar range of our senses converge at a tipping point to create a storm. Mostly, the ocean storm has to do with the Earth’s rotation around the Sun and the exchange of heat over the water. The ocean storm, just like the economic one, is normal and necessary for climate – or an economy to work as it does. We know enough about this science to understand the basics, even if we can’t always predict the exact details. Of course, for the schmuck pitching and straining to stay alive during a storm, temperature transfers are the least of his worries. He’s just wishing he’d gone around, rather than through the middle of the damned storm. In any case, he knows he can’t shout, “stop, while I think about it.” Nor does blaming God, the Devil, or even himself for getting caught unawares improve the immediate situation. Thinking on his feet and reacting to current circumstances might.
There are a few similarities between this economic situation and an ocean storm. It could serve as a good analogy to help people understand the chaos. Instead, the vast majority of people are so confused about what is happening, they are creating truly inaccurate stories in their heads to make sense out it all. Unfortunately, their stories have as much bases in reality as the myths ancient mariners created to make sense out of ocean disasters.
In the last two weeks, I’ve been out and about, all over town. I’ve listened to people curse the jerks on Wall St. I’ve heard so many mixed messages from politicians and the media it is no wonder that the man on the street is angry and hopelessly confused. “They’ve ruined our economy and forced the American taxpayer to save the fat cats. They’re taking hard-earned money from hard-working people!” This reaction makes about as much sense as the sailor blaming God for the ocean storm, but few people have any idea why.
This current economic crises is one of the most serious events we have faced in our lifetime. Yet, our leadership such as Senators, Paulson, Bernake, and others say things like, “We have a liquidity crises and problems in the credit markets.”
What the hell does that mean to most people? Nothing.
I don’t think I have ever seen worse communication in my lifetime at a time when quality information is desperately needed. An example of one sharp and experienced voice is former FDIC chairman William Isaac who wrote a superb op-ed piece in the Wall St. Journal September 19 on Fair Value Accounting and other ways to save the financial system. In spite of its nice-sounding name, this concept is a hydra in sheep’s clothing. This rule has created a huge cascade of negative consequences in the recent Wall St. meltdown. Mr. Isaac lucidly explains how these and other bad accounting rules, such as this marked-to-market rule, adopted over the last 15 years by the government at the request of an accounting profession desperate to avoid costly litigation have created a monster. Yet, how many people understand the implications of this law? This law impacted the implosion of Lehman Brothers and Washington Mutual as much as the sub-prime.
The sub-prime meltdown is not just a Wall St. screw up. They are multifaceted. Nor is blame an effective strategy during any crises. Recovery is about accepting responsibility and that includes Congress, the Executive office, as well as you and me. For one thing, we have to start electing people to Congress who have some grasp about the laws they are making. Most simply do not have the education to know the consequences of what they vote on. We are see now inadequate understanding can lead us.
So here we are, in the middle of this storm, minus a leader who can step up to the task and make sense out of this chaos. It’s an opportunity for a leader to add clarity to what led up to this problem. And, like the storm that balances climate, this crises can ultimately improve our economy. Yes, improve it. To get to that point, America and other world economies need reassurance and perspective to trust before they are likely toreturn to normalcy.
Sadly, no one seems to have the common sense to grab the knife, shimmy up the mast, and speak in plain language. And that’s what we need now more than ever.