Blue Space » 2008

10.24.08

All the Fed’s Horses and All the Fed’s Men…

What if very complex problems do not require even more complex solutions? I know that this works against the grain of the independent American spirit of “pulling yourself up by your bootstraps” and “necessity is the mother of invention”, but what if the problems became a problem BECAUSE they were overly complex. Our elitest “group think” instinctively believes that we need to find the smartest guy in the room to figure these things out and engineer a solution because we don’t understand the things anymore. If paid well, this genius will work very hard and produce a solution that is extremely complex and will likely be almost painless. We then applaud him for his ingenuity and effort, but often even he is unsure if his extremely complex solution will work because it has never been tested. When tested if his genius idea fails it simply leaves us poorer and more hopeless of finding a nearly painless solution. Meanwhile a distinctly non-elitest, simpleton proposes a simple, highly effective solution that is very painful.

I hope at this point you have a glint of an idea of where I am going with this.

So to bring the simple full circle, I would like to put forward a nursery rhyme. All the Fed’s horses and all the Fed’s men couldn’t put the credit markets back together again. I do believe at this juncture that this nursery rhyme is sadly apropos. The lesson of humpty dumpty is that sometimes the thing is broken and cannot be fixed. All additional effort by the kings men would simply be wasted and so I suppose humpty dumpty is abandoned or cleaned up and taken away.

I believe that the US Federal Reserve and Congress are simply throwing more and more money on top of humpty dumpty and hoping that he is magically brought to life. I would advise them to stop immediately. The credit markets are in shock because of at least a full decade of engineering more and more complex debt related instruments. These complex instruments theoretically were supposed to work, but a dose of fear and lack of trust has shown them to be nothing more than a pipe dream and a house of cards. When a house of cards falls does it make sense to set a few back up to buy time?

The reality we face is a future without much of the debt related assistance to which so many of us (persons, corporations, local governments, state governments, federal governments) have become addicted. Almost two decades of nearly placid economic waters have left us wholly unprepared for the days ahead. If I must make a comparison, we are as soft as the Pillsbury doughboy. The unexpectedness of our new reality and our general unpreparedness can only be made worse by not owning up to our problems. We can tighten our belts and face our new reality or continue down the path of spending ourselves into oblivion.

Author: joe | Permalink | 1 Comment | Daily Entries

John 14:6

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All the Fed’s Horses and All the Fed’s Men…

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