Capital Markets Update

By Louis S. Barnes Friday, December 23,2011

"Marley was dead; to begin with. There is no doubt whatever about that… Marley was dead as a doornail. Scrooge knew he was dead? Of course he did."
"Scrooge! A squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner! Hard and sharp as flint, from which no steel had ever struck out generous fire; secret, and self-contained, and solitary as an oyster."
Very little real news this week, markets lurching to no account, trading so thin that the landing of a snowflake avalanched 300 points of Dow. Uphill.
The issue at hand: the debt and austerity trap. We must stop borrowing, but to stop we must cut spending or raise revenue or both. If we do that, and our economy or the ones over there or there slow down, then we will have less tax revenue and more need -- or wish -- for spending and borrowing.
How to escape? Devalue currency, stimulate exports. However, not everyone can be a net-exporter. There's no future in devaluing the dollar because we've been beaten to it by the Brits and the Euros (just begun), and China will soon switch from phony appreciation to very real devaluation, as Japan would do if it could figure out how.
On the Brit plan, devalue, cut spending, raise taxes, central bank prints, tolerate 5% inflation, force banks to lend and reform at the same time. Then kneel and pray.
On the Euro plan, pretend. The Japan plan:_____ .
China "Plan A": sell until customers can no longer buy, their wages undercut and debt too high, but by then China's domestic economy will be self-sustaining. Too bad: its customer-victims are tapped out a couple of decades too early. No "Plan B."
Caught in the ever-tighter mathematics of austerity and debt, what can we do to escape? That doesn't cost any money?
Ethics.
Simple as that. Start anywhere.
In boardrooms… if your CEO does not begin every day by considering the health of the markets and society in which the venture makes its money, and the contribution or damage the venture makes to the outer world, get another CEO. If commerce degenerates to cops and robbers, as it has, ultimately there will be too many rules and cops to conduct commerce.
The National Association of Realtors announced this week that it had over-counted sales of homes by 650,000-800,000 in each of the last four years. NAR, the voice of a million mostly hard-working brokers, which claims also to speak for homeowners, did not care enough to get it right. Or to say that it was guessing. Shame on you. Booooo.
New Fed rules require an independent committee of directors of large banks to be responsible for risk management. Wow. Directors to know what management is doing. Small banks, too, maybe? Might businesses other than banks take hint and heart?
We who feel disenfranchised, wondering if our silent Congressmen and Senators are still alive… we wish the spirit of Dickens gives them courage to speak blunt truth.
If you inhabit a wing of either political party, acknowledge daily to yourself and out loud to friends: "I know that my wishes will never prevail on the other three-quarters of Americans. Further, demanding my ideal will not increase my chances of getting part of what I want, and instead will lessen my chances and hurt my country."
Democracy and citizenship are easy: majorities may not oppress minorities, nor minorities paralyze majorities. Nothing to it except thinking about it once in a while.
Do not engage with fairy tales. 99.9% of the web does not have the benefit of an editor. Do not believe as fact anything that you see, forward it, or say it until crosschecked and verified. Goes triple for the economic realm, on the web or off.
If you have not discovered that your cell phone disturbs others nearby, or makes you drive as though stoned and lobotomized, work on it.
One no-cash way out: Ethical behavior enhances civil society and its productivity.
Merry Christmas!!