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When Dubai wobbled last week, everyone rushed to the Internet to
await confirmation of the imminent bailout.
And they saw what they wanted to see!
The airwaves (and pipes) were clogged by a steady stream of pundits
declaring that there was no way Abu Dhabi would let Dubai go bust.
Why not?
Because if Dubai went bust, then... well... then the
stock market might go down for a while! Then the idiots who
loaned Dubai World money to build huge islands and buildings in the
desert would have to pay for their stupidity! The buildings'
ownership would change in a debt restructuring--the kind that happened
a few months ago to General Motors, the kind that happens every day in
a normally functioning capitalist economy!
INCONCEIVABLE!!!
Remarkably, against this tidal wave of panic and entitlement, Abu
Dhabi stood its ground, refusing to reward idiocy by throwing more
good money after bad.
And lo and behold... the world's stock markets have stabilized and
Dubai is having civilized conversations with its lenders, the same way
folks who have had to restructure their debts have had since the dawn
of time.
In the United States, meanwhile, Messrs. Bernanke and Geithner no
longer have to assure us that they will never let a big bank
fail--because we understand that this guarantee has basically been
written into the United States constitution. The LESSON OF
LEHMAN BROTHERS has been learned, and the lesson is this:
We have become a nation of fat, cowardly wimps.
Specifically, after 25 years of debt-fueled consumerism, we have
become a nation accustomed to instant gratification and instant fixes,
led by politicians and regulators terrified of having to tell us the
harsh truth:
We lost our discipline. Getting it back will make life tough for a
while. But it will make us stronger in the end.
It wasn't always this way. In fact, the era of prosperity that
we've just enjoyed was made possible by a leader with a huge
spine--one who, unlike our current financial and economic leaders,
wasn't afraid to risk his job (and enormous public pressure and
disapproval) to do the right thing.
Who was that leader?
Paul Volcker.
How much public hatred was Volcker willing to withstand to get us
back on the right track?
Take a look at the chart below. The red bars are the Fed Funds
rate (which Volcker directly controlled). The blue line is
unemployment (which he indirectly controlled).
In 1980, with the country beset by chronic, runaway inflation, Paul
Volcker decided to do something about it. Specifically, he hiked
rates sharply, into a weak economy.
What happened?
He killed the economy.
Unemployment soared--spiking from 6% to well over 10%, the highest
level since the Great Depression. The economy crashed back down
into a double-dip recession. Millions of Americans were put out
of work. The stock market plunged to 15 year lows.
But Paul Volcker held fast. And a few years later, inflation
was all but dead, setting us up for two decades of prosperity (and one
of letting ourselves go to pot).
Fast forward to today. Today, we are led by men like Ben
Bernanke and Tim Geithner. Men who are so afraid of the
consequences of making people pay for their profligacy and stupidity
that they have restarted the debt bubble (free money and bailouts for
Wall Street, FHA, cash for clunkers) and made Too Big To Fail a
national policy.
Take another look at that chart.
Do you think Ben Bernanke would be willing to withstand the heat that
Paul Volcker took to get this country back on track? Tim
Geithner? Larry Summers? Barack Obama? Do you think
any of them would be willing to stand up and deliver the message this
country--and Wall Street--desperately needs to hear?
We don't either.
But at some level, we can't say we blame them. Given our
current national attitude, we would fire them instantly for even
daring to suggest such a thing.
But we'd still be better off hearing it. And it would make us
stronger and better in the end.Join the conversation about this story
»See Also:Dubai Actually In Talks To Restructure Debt Instead Of
Getting A BailoutMarc Faber: Dubai Was Just The Tip of The Sovereign
Default IcebergHow Tim Geithner Screwed Us All
This news story was reported by Business Insider 1 minute ago
* Read the full article at Business Insider:
http://bit.ly/6Qyu7g
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