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Locked inside an expensive and Depressing story

Up until October of 2008, the big story was the US Presidential elections.

Obama or McCain,
Change or more of the same?

 Then Wall Street refused to be ignored and decided to collapse, and companies that were once the unshakeable pillars of the financial world came tumbling down like a scene from a  disaster movie. Candidates could be forgiven for believing that this might not be such a bad election to lose, because there seemed no easy outs, no simple or instant solutions.  No expert knew exactly how we had got ourselves into this mess, and no Candidate had any plan to get us out of it, save for the assurance that if you vote for him you could at least enjoy a temporary catharsis.

 Congress and Presidents, past and present, have determined that regardless of the cause, the one necessary solution was ACTION- broad, swift and decisive action by the Government injecting a multi-billion dollar cash infusion into the banking system to get credit moving again. That is the story that Bush told us then, and Obama is still telling us now. Yet it all has a makeshift quality about it that is hardly reassuring, because clearly, they are making it up as they go along. “Trust me” the President is asking us, “even if none of us knows exactly what we are doing or if it is going to work.”

 Crisis usually brings out all the old war stories-the old half remembered solutions to half forgotten problems that we thought we had solved for good way back. The President  and other commentators keep saying, “This is the worst crisis since the Great Depression,” as if most of us hearing that know what the Great Depression was. But unless you are in your 80’s, you have no first hand experience of that defining financial collapse 79 years ago.

 Instead, what we have is ‘a story of the Depression,’ a constructed memory, a film, a novel, a “Grapes of Wrath” kind of fiction. Hence the story we are using to inform our response is one that is beyond living memory. Ben Bernanke, Chairman of the Federal Reserve is an esteemed academic who has spent his life studying Wall Street in the tumultuous 1930’s and so, to him, the question seems obvious, ‘How do we solve this Depression?” By default, we find ourselves in a 1929 Depression Redux  with all its attendant chorus for reform.  If the Bush years gave us Neocons, now we witness the revival of the Keynesians who advocate swift and massive government intervention.  Our response makes sense if we determine we are back in that same 1929 story. But are we?  Have we so quickly overthrown the once infallible dogma of the primacy of the marketplace?

 The market, until only yesterday it seems, was the best self-correcting thermostat for an overheated economy. The only regulation it needed was the Fed and Alan Greenspan to adjust the interest rates. Are we now rolling back the years?  Instead of government being the problem, government is now going to be the redeemer, literally, the one to buy back the lost and devalued assets, to take the toxic debt off the books, free up the flow of credit? It makes mockery of President Reagan’s much loved story about the most disturbing message any citizen can hear, “We are from the Government and we are here to help.”  That is Obama’s election promise. How did a joke suddenly morph into serious public policy?

What we the public are being treated to is a theatre of the absurd. Though no one knows for sure how we got here, we are being asked to trust the government to lead us out. We are taking actions that are over-informed by stories of past economic crises that may or may not have any resemblance to this one. If this is indeed the same old problem, then why all the panic about how to address it? We’ve been here before, right? But then, the experts reply that this is really different, unprecedented even.  Go figure. Enslavement to old stories discourages any new quest to detect what were the determining causes of this collapse and how it might be different? Surely globalization has made it more precipitously complex, and reducing financial risk to the pseudo science of an alogarithm surely makes October 2008 worthy of its own story, and one the media should go looking for.

 But instead, the media are treating us to a veritable orgy of ‘Economy Tragics,’  grateful for a catastrophe that is blessing them with more bad news than they have had since Katrina. And the gloom and doom will make for great human interest stories. Who has lost their job this week? All the while, no one seems to be able to snap out of this bubble of panic and Depression hysteria that has us trapped inside our own anxiety. We are acting out of unexamined stories of the Great Depression, and these seem to be driving the strategy of recovery as well as making us all feel depressed. As FDR warned us, "Men are not prisoners of fate, but only prisoners of their own minds."

 A more honest accounting might be to level with the American public and to confess that we don’t have a handle on this yet, because the jury is still out on its root causes, because we may still be a long way from bottom, and because we are still gathering evidence. We need to be warned of jumping to hasty conclusions, or pursuing a populist blame game before we even know who was in the game, and what the game was. The CEOs that we once canonized for their ability to game the market for our gain, are now accused of gaming it for their own greed. Suddenly it’s all about them and not about us. But then it never is about us. We are all innocent victims, with only an accidental resemblance to all those crazy amateur investors who helped inflate the housing market in the first place. We begin to sound a lot like a pack of sore losers.

 It might even be healthy and honest for our leaders to confess that we are going to have to experiment, that we are going to do what any doctor does when he is faced with a mystery illness, that we are going to attack it with a number of drugs and assess whether they have any effect on the symptoms. And what we need to display is greater flexibility, an ability to change course quickly, and be extra vigilant lest we be trapped again in any ideology or old story that shapes decisions detached from reality or divorced from results. Enough of supply side economics, and goodbye trickle down growth. If ever there was a time for the resurgence of good old fashioned American pragmatism, the William James psychology of “truth is what works,” it is now, where we will know what is right once we know what works.

 As FDR told the American people in the wake of that other Depression, (that scarey story again)

"It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something."

 The only way to test an uncertain reality is to act on and in it and weigh the results against the ending anticipated by our informing story. If the facts don't fit, we need to find a better story. Stories decisively inform our choices, because every decision we take grows out of one story or another. One of the key decisions before we act is deciding what story to act out of, and after we have acted, we need to be able to ditch the story if clearly it no longer has a purchase on present reality. To keep mindlessly repeating the mantra, "Worst since the Great Depression" is one thing, but one can already safely predict that the Depression of 2009 is going to be a whole other story from the Depression of 1929. The sooner we look for that story, the sooner we will innovate our way out of our financial drama.

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