Wednesday, April 08, 2009

Define the Crisis

The word crisis is quite convenient for writers and politicians because each listener has his own version of what "The Crisis" is. The Asian news agencies like to use the term, "Financial Tsunami," which colorful as the term is, clarifies absolutely nothing.

Some say it's a financial crisis, and refer to the difficulties that the financial community is undergoing, more specifically, they don't have enough money-liquidity-purchasing power to carry on business as they had done prior to the housing bubble burst. In the routine parlance of financial analysts, it would have been called a "correction." To most people the meaning of "correction" has no precision, and only suggests that things weren't going as expected, so the "force of the market" made things go suddenly in the opposite direction for a short period of time. I like to compare it to a fountain that uses a pump to take water up, and deposit it in such a way that gravity will cause it to go down. But the financial markets are more complex. There is water is being churned and added to the fountain by unknown operators, and while the pump is working, everything appears normal... until the pump fails, then, all the extra bubbles and water drain off the borders of the pool.

The financial crisis within the financial community is a subjective definition based on the there not being the level of activity they would like to continue to amass their huge bonuses and extraordinary profits, which themselves are not consistent with the real economy of labor and production.

The notion that all financing and purchasing power can only be generated by the financial community's behind their wizardry curtain of smoke and mirrors, seems to have become a dogma of modern economics, as the sine qua non of life on earth. Few consider changing the system because few understand how corrupt it is, or fear the unknown of what would happen if all banking failed.

The obvious answer is that governments would then be free to establish other methods of money distribution and credit generation, and the real economy of labor and production, upon which the financial markets depend, will end up at the helm of finance, and the financial community would simply become a supporting role to the real economy, than rule the world, as it now does.

The real crisis is that government hasn't the courage to do the exact actions necessary to restore employment and production bypassing the financial community. The real crisis is people hungry, with little resources to plan a future. Those in the financial community even in those organizations that are failing and have had to accept TARP are still driven around in limousines, and dine in expensive restaurants, and enjoy their home swimming pools and saunas. All that's missing for them is the public's money so they have something to do during the day when they go to their trading desks or management desks.

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