THE ECONOMICS OF LIARS
A friend asked me today what I thought was causing today's roller coaster of market lunges. He looked at the variation in the ups and downs and immediately assumed that the problem was with computer trading. I told him I doubted his theory because reforms were put in place during the late '80s to help limit that volatility. Then I referred him to Robert Reich's blog.
It's not likely to do all that much good because no one knows how much bad debt there is out there. Even if the government bought a lot of it, investors and lenders still couldn't be sure how much remained. After all, big banks have already written down hundreds of billions of bad debts, and that hasn't restored confidence in the Street. As the economy slows, bad debts will grow.
Later my friend came back to ponder how long the markets would gyrate and what it meant to his 401k. That's when things got interesting. While my buddy was focused on assessing the true "mark to market" value, I told him he was missing the most important point Robert had made. That point is that the bail out did nothing to restore confidence in the markets.
That is when the conversation turned to prudent regulations. But I pushed back on that too. I don't believe any amounts of regulations will fix the markets until we impeach and punish the administration I told him. My friend was immediately put off by my comment and said I was too partisan to look at this clearly. I smiled when he said it and asked for him to be patient enough to allow me to explain how my comment was not partisan at all.
I asked him to consider this scenario. If he had $1000 in his pocket that he didn't need for a while when two people asked him for a $1000 loan. Then I told him that he knew both parties were easily able to pay him back according to his terms and that he could name the interest rate. I told him that one person had a record of always being trustworthy and his word was his bond, but that the other person may use the same words but couldn't be trusted to actually carry them out even if he had the money to repay the loan. I asked him who he would loan the money to. The answer was immediately obvious to him then.
Next I asked him if the world thought that our country was run by people that were trust worthy? Did they obey the laws. Were their words reliable. He said the administration did follow the laws and could be trusted.
I pushed back. Did they follow the law when waterboarding was allowed? How about when Scooter Libby outted Valerie Wilson? Did they follow the laws when spying on Americans without warrants became policy? Did they follow the laws then Monica Goodling helped load the Justice Department full of "good" Republicans? Did they follow the laws when they fired US District Attorneys so they could install attorneys that would prosecute Democrats? Did they change any laws when Enron stole the pension funds from their employees? Are golden parachutes continuing to be paid? He stopped me because he has heard me go on a rant before.
He answered no to all of my questions. He didn't believe they followed the law and I'm sure nobody around the world sees it much different. Then I asked him if laws or regulations matter in our country to the point that anyone would be confident in our system. That's when he understood.
Absent justice we will continue to suffer diminished confidence in the American way of life. We need to start impeachment hearings on this President and we must punish the people who have blatantly disregarded the law. This must be done in the light of day for the world to see if we want to restore what it means to invest in America.
