Denial Dominates the Dummies
Denial Dominates the Dummies by David Haggith for The Great Recession
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One of my reasons I started this website years ago was to counter all the denial that I saw in the mainstream media about how long and deep the problems from the Great Financial Crisis would be and about how we were failing in every way to resolve the greed, decay and especially faulty thinking that would assure our next collapse would be even greater than the Great Recession.
Today, the same lame thinking still dominates, but not just in the media. It’s pervasive in the general public, too. Of course, it is particularly prevalent among high-flying stock investors, who actually think because stocks can float above it all, the world must be doing fine.
I found myself observing a … shall we call it … a balloon ride crowded with lightheaded investors floating over my little mountain this week? (I live in the mountains, you know?) Even as I tried to shout out a warning that their overcrowded gondola was starting to tear at the bottom and that the top of their balloon was on fire, they scoffed and sailed on past me on the trade winds out toward a vast and stormy looking reach of rocky peaks and deep canyons. They could have landed on the grassy uphill slope just before my little mountaintop and got off, but all they could seem to see was blue sky. It beckoned them.
I am still dismayed at how light heads can be at their level of floatiness. The thin air is obviously not conducive to clear thinking. While I believe it is vital to keep yelling warnings to those whose heads are in the clouds to try to wake the world out of its lunacy, sometimes breaking dreams that float on nothing but hope feels … hopeless.
Years of irrational thought about the economy and markets have kept us from making the many fundamental changes we need in order to get back to the solid ground of an actual capitalist economy. We cannot build structures that reach into the sky without respect to the laws of economics as well as a set of man-made rules that prevent behavior that is well known to be reckless and, so, destructive to others. I’m talking about behaviors that serve only a greedy few. We want, instead, to keep feeding dreams of clear and unrestrained flights of fancy to easy riches.
In economics, that means we’ve burned up regulations like Glass-Steagall and cast off such ballast as the illegality of stock buybacks in favor of sailing higher and faster with no restraints. We’ve untethered the high-flying market from solid economic ground. Worst of all, we’ve become so lightheaded about how economies and markets function, that we cannot see or understand the storm we are sailing into or heed warnings that might bring us safely down.
What follows is an example from my experience this week in the airy writings and oxygen-deprived comments of a small clutch of light-headed investors.
Inverted thinking about inverted yield curves
While I continue to come across many articles that exude lame thinking, I’m going to focus here on just one. I won’t name the person who wrote it or provide a reference to it because he’s small potatoes. If he were a big public media name like Krackpot Kudlow, I’d reference his article directly; but my point is not to lampoon the person but to show just how poor the prevalent arguments from stock investors and advisors continue to be.
The article I’m referring to asked whether a recession was coming based on recession indicators we talked about last year here on The Great Recession Blog. Only we talked about those indicators a year or more ago when they could actually indicate something. The author thought it good to say these economic wind socks, now relaxed, indicate we will not fly into a recession, promising calm, blue skies for market balloonists in the days ahead.
I had to wonder if the writer lived on mars and hadn’t noticed that a recession was already declared to have begun in the first quarter of 2020. I even had to look at the date of the article to see if I was reading a rerun of an old article. Nope. Current. Wow, I thought, as I looked at the tornado howling through the canyon they were about to fly over. Not a good time for balloon rides.