You Survived Black Swan Month
Congratulations — you just survived Black Swan Month. And in the process, a persistent and seemingly prescient Internet rumor has been put to rest.
To refresh your memory, the rumor dated back nearly a year. During a secret session of Congress, members were supposedly briefed on plans for “the imminent collapse of the U.S. economy to occur by September 2008”… followed by “the imminent collapse of US federal government finances by February 2009″… followed by the introduction of the Amero and roundups of dissidents to be hauled off to camps built by the former Halliburton subsidiary KBR.
What made the rumor so spooky, of course, were the events of September last year — Fannie and Freddie nationalized (although its debts weren’t taken onto government books, go figure), Lehman collapsing, Merrill Lynch’s shotgun marriage, WaMu seized, Wachovia, AIG… as I said last month, maybe not outright collapse, but close enough.
But it’s hard to say “U.S. government finances” collapsed last month. Yes, we now have a record-high proposed federal budget with a record-high deficit to match. But none of the possible catalysts I wrote about took place: Commercial real estate is in horrible shape, but nothing that’s triggered a big crisis. The Treasury auctions went about as well as could be reasonably expected. U.S. Treasury debt is still rated AAA.
That’s the good news. The bad news is that all the Black Swans that could have shown up in February and didn’t could well show up during March. Because the driving forces behind fading market and consumer confidence are all still there — starting with indecision and repeated acts of insanity from the White House and Treasury stunningly similar to that of the previous administration.
I mean, how many more bailouts is AIG going to need? “Had the government not taken such action, AIGwould have had its credit ratings cut by major agencies,” reports Marketwatch, “and that would have triggered the need for the firm to post collateral it did not have.”
Collateral it doesn’t have — isn’t that sort of the whole problem everybody’s got? So there are the Fed and Treasury essentially telling us, “Yes, we know the last bailout didn’t really do the trick, but take our word for it, this one will.” It’s like Bullwinkle forever trying to pull the rabbit out of his hat — “This time for sure!”
At some point, he’ll pull out a Black Swan. Then it’ll get really interesting.