Don't go grocery shopping when you're hungry, right? You might feel good at the moment, but you and your wallet will regret it later.
There's another good rule in the pantry. Don't go regulating economic and fiscal matters when you're just coming out of a recession -- easily the biggest recession this country and the world has seen since the birth of capitalism. This is true when counted in dollars and sense, but in the depth of the hurt that's been distributed, it still only runs second to the crash of '29.
Apologies to folks who are out of work, out of a home and out of money. I wouldn't wish your situation on my worst enemy even if I had one. But truth is, you're in a better situation today than you'd be if it were 1929.
And when I was much younger, being out of work, out of a home and out of money wouldn't have seemed that strange either. I passed through the crash of the '70s without ever noticing it, and not because I was flush with money. Yet just the other day as I was telling the census lady that the neighboring house was empty and on the auction block, she shook her head and said sadly, "I see so many of them these days."
But regardless, this is the wrong time to be writing any but the most immediately needed and necessary rules and not time for comprehensive policy at all.
Because most of the world is still running just a trifle scared. We're just beginning to rise out of the recession and some aftershocks could be as bad or worse than the first, and that makes it the wrong time to make any but triage decisions such as tarps and stimulus programs and stopping blatent criminal activity. We need to wait for things to calm down and stabilize more before we can look clear-eyed at what happened and begin to make things right.
Once we understand what went wrong, we can make better policy and write better rules that will be a bulwark of hope against such things in the future, while at the same time -- and here's the tricky park -- making policy and writing rules which don't inhibit creativity, innovation and the enticement to take risks in the market place.
There's nothing wrong with short selling, credit default swaps, insuring your investments and leveraging assets. They are creative functions of the market that allow for liquidity which ensures growth and prosperity. The responsibility inherent with this creativity is to see it is not abused.
Of course ground rules dictate that abuse of opportunity seems a part of human reality and can likely be expected in future endeavors, but it is precisely that which needs to be regulated, curtailed and inhibited. Actually, greed is the greater overlying cause that needs to be curtailed, but centuries of trying have pretty much shown this to be a wasted endeavor and should be accepted as a fact of life and dealt with it as best we can.
In any case, it's happening. The fear is setting in and here are the reasons why. Here and there a few nations were much further overextended than anyone would dare admit and are on the verge of failure if not already bankrupt. Portugal, Italy, Greece and Spain are leading the pack and deliciously referred to as the PIGS. Other nations, fondly called the BRIC (Brazil, Russia, India and China) are growing rapidly in all dimensions and growing global wealth as they move upward and outward.
China is playing games with its currency and debt (mostly ours) while it expands its assets rapidly throughout Africa. Probably looking out for her future oil needs which are likely to dwarf the rest of the world. On a plus note, China seems to be leading the world in green technologies too.
Right now looking at China and all her wealth and potential, I see a grinning Cheshire cat licking herself contentedly behind a big bag of money winking slyly as we look away. China knows she's bound to see us succeed for no other reason than we owe her so much money, if we bellied-up, she'd be in deep do-do.
That aside, China's out to prove that a central government in communist mode can maintain a vital capitalist economy just as well as any democracy. Personally, I maintain that China's contact with capitalism will result in the gradual erosion of communism as democracy just naturally takes root. You can't tell people with money what to do. It simply doesn't work.
Iran seems a burr between us, Israel, China, Europe and Russia because nobody wants them to become nuclear until they get a saner regime in charge and we've all got different ideas how to accomplish this. Meanwhile, a major focus of activity has shifted to the triangle between Afghanistan, Pakistan and India (two of them nuclear armed) with the Taliban, al-Qaida and Kashmir in the middle stirring up the witches brew.
Fortunately, China, India and Russia are all going to come down on the side of free market trade because they're all getting very wealthy from it, so the matter will very likely be decided on the side of money. It always is, isn't it?
But many nations, including us and out of fear, are slipping into protectionist schemes and isolationist policies here and there in our dealings, causing other nations to react in kind. This can't be allowed to continue. We should be leading the world in these areas. They are our areas of expertise. Protectionism is a slippery slope back to an economic reality that can no longer be sustained.
We seem to have crested the wave of the recent bubble and are beginning to move more gently down the backside of it as the most aggregious abuses deflate to a more stable condition. Twenty-five years from now people will probably look back on this past quarter century as one of the most massive increases in global wealth in history. The injustices and hurts will be over and past and -- depending on how crazy we get with regulation right now -- stabilized into a steady growth pattern again. Just on an exponentially greater level of wealth and complexity.
The point is, the only economic and fiscal rule and policy making we should be doing now is that which is absolutely necessary. Any major economic policy making and rule making on both global and national levels should wait until the world and some of the more dependable economies (among which we are still numero uno) have stabilized.
If you follow the money and currency markets you can see that the U.S. dollar is still the place the world runs to when the risk gets a little scary. Which is a very good thing for us. But the point is shopping for groceries when you're not hungry leads to wiser, more rational and profitable decisions.
So given that for the moment rational inaction is called for regarding regulation of economnic and fiscal activity, we should be telling our politicans to sit down, shut up and pay attention while we call, write and protest to our bankers and investors and top regulators. Yes? No? Don't you wish we'd have listened when Greenspan warned against irrational exuberance? Fat chance. We were on a roll.