America, it seems to me, is engaged in a form of self-mutilation I call the "death of 1000 clichés."
While waiting for the other shoe to drop, frankly, I have to say that Hurricane Ike wasn't as strong as forecast and the fundamentals of the economy are sound. (a riff on this theme, very funny)
"Feel good" Americans consume substantial quantities of drugs, both legal and illegal, to achieve their desired mental state, but the most abused narcotics are the deceptions that become clichés- clichés are popped faster than valium and xanax when things don't go well. Their frequency of use is directly proportional to the delay in effective response.
Let's consider a few.
1) John McCain, who admitted The issue of economics is not something I've understood as well as I should, nonetheless continues to assert alternatively, that the economy is fundamentally sound or that the fundamentals of our economy are strong.
He is, of course, not alone in popping this cliché, which has overtaken in popularity the late 90s, early 00s bromide, "stocks are a good investment."
The currently popular cliché begs the question, "what are the fundamentals of the US economy?"
As Milton Friedman, inter alios, have argued that, "those basic forces of enterprise, ingenuity, invention, hard work, and thrift...are the true springs of economic growth." In a capitalist economy, in theory if not in fact, money and markets are the fundamental tools used to unleash those true springs. Thus, Friedman argued, The first and most important lesson that history teaches about what monetary policy can do -- and it is a lesson of the most profound importance -- is that monetary policy can prevent money itself from being a major source of economic disturbance.
In my view, money and markets, the fundamental tools of capitalism, are working against the true springs of growth- particularly with respect to thrift.
The "sound-ness" of our debt based currency has been eroding for some time and with each addition to Federal obligation (Fannie and Freddie) and dilution of Federal Reserve collateral, the erosion picks up steam. People thought they were being thrifty pouring savings into equity and housing markets, but they weren't.
2) An ancillary cliché, "we believe in (or remain committed to) free markets," is often "popped" to counteract intervention indigestion, sometimes in combination with " a strong $ is in the interests of the US."
Free markets aim to discover fair value. When fair value isn't discovered, such as occurs when markets are used as price enforcement, instead of price discovery mechanisms, markets don't clear.
Speculators often become scapegoats when prices move in unpopular directions, yet, as many in the SE US are discovering, expensive products are better than no products. As I wrote to a friend today, I wonder how many millions of barrels of oil were sold by speculators fearful of the wrath of Congress.
Speculators also take heat when prices fall. In the equity market, their actions are often resisted by management through deception, omission, and intervention (think stock buy-backs) to the cheers of share-holders.
Yet, in an increasing number of cases, management resistance obscured a signal many share-holders, in hindsight, wish they had heeded. A little more speculation and transparency along with a little less self-dealing might reduce the number of sudden collapses in equity prices en route to bankruptcy.
The same might be said for the value of the US$. I'll take a fairly valued currency over an artificially strong one any day. The latter scenario begs the "banana republic" collapse a la Thailand '97.
3) The "it's better than I expected (or was forecast)" bromide is very popular among both financial market and weather watchers who were a safe distance from the crisis to which the cliché refers.
This begs three questions which are rarely considered by hard-core users: 1) what were you expecting? 2) have you seen the carnage? 3) why not?
I heard (and read) this cliché in reference to many recent hurricanes. In part the response is a function of weather forecasters' choice to "over-forecast" a storm to save lives (an option some economy forecasters might consider) as well as the desire among hard-core meteorologists to see a really big storm- a desire which usually ebbs quickly once they get the experience.
Yet, in the cases of Katrina, Rita and Ike, the destruction was quite extensive.
Here's a look at Ike's effects.
before and after:
The "better than expected" quip has also been used recently with respect to Houston area refineries. While the refineries proper, according to my research, did escape with limited damage, they have no electricity, water, sewage, or infrastructure to either receive or deliver product, not to mention the problems of their workers getting to work.
To repeat, their frequency of cliché usage and acceptance is directly proportional to the delay in effective response- it widens rather than narrows the always present gap between reality and the perception thereof.
Altering maps to improve one's territories is akin to putting posters of sunny skies in windows when a hurricane is about to strike.
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