Tuesday, May 22, 2012

In the Long Run We're All Dead...

Greece's former prime minister says there are preparations in the works for a Euro exodus, just in case - and U.S. stocks rapidly give up the day's gains... Isn't that interesting? Every economist with no skin in the game has been predicting Greece's ultimate ouster for at least the past couple of years... So wouldn't ya think Greece might attempt to batten down the hatches, just in case? Should we therefore be alarmed? Really?

But here's the problem; the market's (traders') tolerance for pain is exceedingly low these days... All evidence as to what the hell happened points to over-spending, over-borrowing, and over-governing, and traders couldn't give a rip... All they know is thatif Greece exits the Euro, all hell "might" break loose... So any measure (printing) that would keep that from occurring is a buy stock-worthy proposition...Forget about bubbles, forget about the long-run; like Keynes always said, "in the long run we're all dead"...

Clearly, common sense to you and me (the notion that when you party too hard you suffer, learn, and [for survival's sake] change) is utter taboo to traders, to too many economists, and to the monetary policymakers of virtually every developed nation... In the trader's, and academic's, view of the world; you party hard, you suffer, you stop spending, the economy suffers, politicians suffer, central bank officials panic, they print, you go back to partying, the economy heals (itself, by the grace of amazingly resilient entrepreneurs) and begins to turn the corner (albeit at a substantially slower than a free-market pace) - and policymakers will believe they made it happen...

Or, in the words of Nassim Nicholas Taleb:

"Just as one day some primitive tribesman scratched his nose, saw rain falling, and developed an elaborate method of scratching his nose to bring on the much-needed rain, we link economic prosperity to some rate cut by the Federal Reserve Board."

As for Greek [fiscal] culture; in the words of David Letterman:

"Facebook is worth $100 billion. Today it was friended by Greece."

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