Black Swan Month -- Part 2
Time’s a-wastin’ for the new president if he has a prayer of staving off the appearance of a financial Black Swan during February.
Yesterday we saw how an Internet rumor now nearly a year old has proven remarkably accurate, at least in its early stages. The U.S. economy might not have “collapsed” last September, but for most folks, what did happen was too close for comfort.
The next part of the “prophecy” is “the collapse of U.S. government finances” this month. Again yesterday, we saw there’s no shortage of candidates to trigger such an event. And it sure doesn’t help that today the jobless numbers are worse than forecast.
It wasn’t supposed to be like that for the new president and his team. Wasn’t he supposed to be the second coming of FDR?
Yet the contrast is significant. FDR’s “first hundred days” brought one bold move after another, including a bank holiday called the day after the inauguration. For the moment, let’s leave aside free-market objections to the folly of the New Deal; I’m addressing the matter of raw emotion, both among finance types and the general public. All those bold moves, however misguided they were, had the effect of instilling a certain amount of confidence, however fleeting it turned out to be.
But what have we got from the first two and a half weeks of this administration? For starters, nonstop hemming and hawing about a “bad bank” to buy up toxic assets. It appears that idea’s about to be put back on the shelf because the hacktastic Sen. Chuck Schumer (D-Banksters) doesn’t like it. He’d prefer “not for the government to buy the assets but rather to guarantee them”.
I feel like Bill Murray in Groundhog Day. Wasn’t the “bad bank” concept basically what Hank Paulson first had in mind for the TARP money, only he changed his mind after he was told it wouldn’t work? Why yes, it pretty much says so right here in thisFinancial Times article.
And whatever form “Son of TARP” ends up taking, it will be formulated with an eye toward growing public disgust with the banksters and the Team Obama appointees who’ve been called out for not paying their taxes. Whenever it turns out to be, it will be Tim Geithner’s one and only chance to demonstrate to the markets that he’s not the second coming of Paulson. Right now, that’s looking like a steep wall to climb.
Meanwhile among the general public, more people now oppose the “stimulus” bill than support it. Doesn’t matter how high the new president’s approval numbers are if they don’t translate into support for his biggest legislative priority. The man who appealed to “hope” throughout his campaign now appeals to fear in an attempt to push it through.
Not exactly the FDR playbook; indeed it amounts to the antithesis of bold action (even if it’s foolish) that inspires confidence (even if it’s misplaced).
We’re six days into the month. It’s 28 days long. Black Swan potential is high. We shall see.