In my way younger days, my mother suggested on more than one occasion that I talked just to hear myself talk. My elementary school teachers had issues with me talking as well. I can’t say for sure, but I probably hold the all-time record for “timeouts in the hall.” For many years, I accepted that as my “problem.” Well, life is full of flips and flops, as I now don’t see my gift for gab as a problem; it is an asset that has opened doors and sealed some deals. As well, along the way, I realized my mother was right, and even though my jabbering annoyed her and all my elementary school teachers, the fact of the matter is that when I hear my words, I think. My words in my head help me sort out the issue at hand, so in the end, my “talking” is simply a process that helps me understand my world and the world at large. You parents with kids that yack, please keep this in mind.
Now, all “growed” up and such, I talk less and write more, but the process is still the process. I still use words to understand, but now my “figuring out” is silent, which means I spend more time in the “class” than in the “hall” and the folks around me don’t get so annoyed, or so I think.
My point is that I spend a lot of time thinking (writing), and much of that is focused on the market and the factors that influence the market. These days, I have a lot bouncing around in my head as the variables that affect the market are many and they shift positions constantly. So, what I try to do is reduce the large problems down to an empirical level. Take Europe, for example. In that broad context, we have all the variables around a weakening continental economy, including the sub variables that affect consumer and business confidence in a population of 300-plus million people. On the sovereign debt issues, one is hard pressed to identify all the variables around that unfolding morass. And when it comes to the associated politics of both, well, it is a bit much to think anyone, no matter how many letters they have following their name, or how much money they have made, or how many words they have spilled on the subject, can predict with any accuracy the outcome. So, for me, I reduce the issues down to this – what is the real problem and how will it get fixed? Here is my answer to myself.
The problem is the same problem we had here in the U.S. back in 2008, almost exactly – immense overleveraging that sucked liquidity out of the system. The solution is the same solution we applied in 2009 – print money to provide liquidity. Granted, this unto itself presents serious long-term issues, but the alternative is far, far worse – complete economic collapse and then a long, long, rebuilding process. I believe the powers that be understand this, but Europe, with its loose confederation of states is far more complex than the tight confederation of states in the U.S., so building consensus to get the job done is far more problematic.
Back in 2008, all sensible U.S. politicians understood that financial and economic collapse was imminent, so even those ideologically opposed to the financial bailouts voted for them. They got the job done. Yes, many will read this and jump out of their chairs screaming, “What a simplistic fool.” Perhaps, those who think this should consider Occam’s razor, “the simplest explanation is the most plausible until evidence is presented to prove it false.” As well, they should also consider the following simple reality…
Economists say the pivotal act in recent months was the European Central Bank’s flooding of the banking sector with cheap three-year money, a measure it will repeat next month.
Trade in the day – Invest in your life …
