The Perfect Strategy

The more I think about this country the more I realize that we are in the midst of a Perfect Storm. It is as if something new and disastrous happens every day. The current gust of the storm is AIG and it’s bonus payments.

But, has anyone actually looked into the bonuses? Listened to CEO of AIG Edward Liddy’s testimony about them? Heard Geithner’s response?

I read about Thomas Freidman saying we are an Immature Democracy and Ian Bremmer saying that this focus on the bonuses is a Luxury We Can’t Afford. It seems that neither of them have.

It’s as if this is a zero sum game. Do they not understand how people work. Yeah, Geithner and the president have to focus on AIG, but do they really think that is taking away from fixing this country. Do both of them just not fix things until this blows over…seriously that is ridiculous. And, Congress, by all means they should be focusing on this. Someone failed, money is lost, they need to be our nitpickers. If they are playing politics it is because that is the way the Constitution designed our system. Let them have their hearings and tell AIG and Wall Street: we are annoying and we are watching.

The real story behind the bonuses, can be quickly summarized: Liddy sent out a company memo asking for them to be given back, many already have. Geithner said that whatever they don’t get back they will make the company pay back. In the business of money, its simple, and these folks are keeping it simple with the eye on the prize.

Which has led me to wonder why are folks so focused on Wall Street or the individual moves of one bank? Is this not a game of chess like Mark Drapeau says?

It is all bullsh$t. Sorry, for saying that but all of these high minded folks are wrong. There are people actually suffering. Not wall street bankers who lost their 100k salary. But people in Michigan, California, and our children. All of these people are going through tough times.

And no, it’s not becuase of ‘bad mortgages’ or ‘banks’.  Anyone who says that is the cause of this recession is just plain ignorant or wearing horse blinders. This is a perfect storm. We have several massive, country supporting industries going under. They are not going under because banks failed them. No, they failed in their business.

GM, Chrysler, Ford they are just not making cars people will buy. Then there is textiles, electronics, and any other number of manufacturing companies that have been outsourced or out-competed in Mexico, China, Vietnam. Farmers and the farming industry is making money but not for the average person, the average farmer (what used to be the bedrock of our nation) is broke and dying.

Seriously, get out of your McMansions and go visit the rustbelt, midwest, and inner cities…you think they are worried about their 401k’s?

Then take a step back and think a chess-like four moves ahead. Are we really going to be shocked when banks get start leveraging themselves up to pre-recession levels. Are we going to be shocked when they again hand out bad loans. Believe me, it is inevitable.

Then you could say this is a crisis of leadership, regulation, and bad bets, but it is also a crisis of credit. Our economy is moving almost entirely into the credit world. New consumers, long deprived are going to live through credit. They are going to jump at the chance to have the American Dream, a home. They are going to buy everything they want and believe in minimum payments.

Oh, wait, that already happened.

These consumers are still there. The need for them to have credit is still there. The mathematical models will always find ways to give them credit. And they deserve it. Get used to these bad credit lenders, they are not going anywhere.

Ok, now so I’ve touched on the fact that this perfect storm includes financial failure, industrial depression, and a new credit/service economy. Their is much more going wrong in this country and its perfect storm (2 wars!). But, their is hope and frankly it angers me that not one of these pundits sees it.

So, let me call it out. Because, even though I am a huge Obama fan, I can also see that he is playing out the perfect strategy. Take a look:

  1. Come into office in Jan and lay it all on the table. Describe the problems and how long it is going to take.
  2. Wait.
  3. Markets drop to lowest levels, worst news yet comes out, everyone faces the reality (which was not happening under Bush).
  4. Wait
  5. Change the game. First begin building trust. Obama has a trillion to spend and his first move is to announce that he will save your job and your mortgage.
  6. Wait
  7. Fix the financial system: Bernanke/Geithner both at the same time announce several plans designed to get credit going (lowest interest rates ever) buy up toxic assets (take over banks who have them), and then offer government backed loans (TALF).
  8. Obama slips out of town and as Emily from Slate Political Gabfest puts it: shows America that its okay to have fun despite all these problems.
  9. Wait

Anyone who understand the psychology and politics of this country understands what is going on. Obama knows that credit relies on trust. He knows that our entire economy can ride on sentiment. You have to have both trust and hope. What he is doing is perfect to get that back for our country.

Then, simultaneously, he is rebuilding the economy any way he can. Stimulus, green technology, cap and trade, education. He is getting railed for taking on too much when really he is pushing hard for new growth in our economic sectors.

Don’t take my word for it, either. Do some research and you will find that the deeper the rabbit hole the smarter the strategy.

We are in the midst of a Perfect Storm and if you can see through the rain there is a Perfect Strategy being executed in step by patient step.

3 replies on “The Perfect Strategy”

  1. Unfortunately you left out the responsibility of the American people. We have been willing to turn a blind eye to many immoral or amoral business practices in our search for la dolce vita. We all wanted to keep up with and do better than the Jones including buying McMansions and Cadillacs when we knew we couldn’t afford them. We bear as much responsibility for the financial crisis as any of the wall street brokers or the bankers. After all many Americans aspired to be them. And it is this consumer nature of getting instant gratification that is hurting us today. We want quick fixes when there are none to be had. And unfortunately as the financial crises deepened, the crisis did become a perfect storm. But I fear that our inability to change our nature quickly will cause more harm than good. Can America truly recover? Only time will tell. we do certainly need to learn financial responsibility and teamwork. We’ve done it before against visible threats. David Gregory on Meet the Press today called it the breaching of a social contract between our financial system and ourselves. That’s not a bad analogy for the nature of the threat we have to overcome. We have a breach of contract and no idea how to fix it since our normal consumer methods of fixing things won’t help in the short term.

  2. Kelcy – ur completely right. The social contract is
    broken and a new one is needed. One where unlimited credit is always available but discretion and cultural more’s limit.

    But it makes me wonder, is this a class distinction?

    I’ve always had credit available to me. In fact, a lot business startup up on our credit cards. So does that mean that the new social contract is for the poor and subprime?

    Is their even a distinction of subprime needed anymore. Everyone will have credit available, microloans. With our data and equations everything is just a degree of risk.

    A whole new world…

  3. There is nothing wrong with doing business on credit or using credit for personal purposes as long it’s done responsibly. That might include actions like 3-6 months of expenses saved (in the old days; now they are saying 9-12 months) and making regular payments on your debt with the ability to pay it off quickly instead of dragging it on for years. The problem is when your whole society is based upon consumerism to extend buying power beyond what they could possibly ever repay. Suddenly people are losing their well-paying jobs and they are laden with so much debt starting with houses that contain expensive upgrades like granite and marble and designer furniture and so on. I went through much of my adult life financially irresponsible because my parents were that way and I was more interested in acquiring than saving. I think we have many people in the same shape who grew up after WWII with the American dream to acquire bigger and better and they did so by using credit. And we were perfectly happy to let Wall Street make money because that helped us use more credit. But that dream burst last year as more people lost their jobs causing less buying power and thus more companies to close and then more job losses. Unfortunately it is a catch-22. we should change the way we buy (forced to temporarily) but we don’t want to and will revert back as soon as someone fixes the whole mess. But is it really fixable? Do we want to put ourselves back into the same debt cycle? I don’t know.

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