Wednesday, March 4, 2009

what if we let them fail...

Remember the presidential campaign? There was a moment, in the car listening NPR that I heard these words sort of in the air, "Change is coming! And doesn't have anything to do with you!"

Do you ever feel that? That faint awareness that what is happening is more like a weather pattern or a psunami than a social movement or a political shift?

As jobs evaporate, investors complain of tight markets. As leading banks refuse to "mark" their assets at market value, governments collude in denying their insolvency. Bail outs are increasing, more jobs gone and the snowball rolls. The reinforcing feedback loops that built these banks and political machines alike are now diminishing loops and economic development is no more about growth and expansion. Value once meaning "profitability" and "return" is now ambiguous; open for reinterpretation.

The essence of the quagmire is the information needed to drive effective decisions is not circulating. Balance sheets need balancing. But how right? We don't want to threaten the "brand value of this" abserdly huge banks. Bernanke needs to qualify his statement that there will be "catastrophic" effects of going nothing. If he can't then he might be doing something worse than nothing, as pundits suggest.

New banks with real accounting systems could buy up assets if they new the market value. Governments could get ready to help those affected by a fail out if they knew the measure of the impact. The only thing sure to grow in this economy is the pool of people in need. At least the stimulus package pays some attention to that. But lets get back to the numbers. Where's the data already!! How exactly is doing nothing worse than what we are doing Bernanke?

Accounting is the language of business for a reason. It works. It provides good data to base decisions on. To reveal the numbers of the truly insolvent banks is to set up the banking system for renewal. It will offer investors something to chew on. That is better than the blind speculation leading to the hording that is going on now. Bailouts are just delaying much needed renewal, innovation and proliferating of new economic inventions. We need a visionary leader like the Morgans and Rockefellers wonder were.

We need to change the conversation. For too long the language of capitalism as poo-pooed social responsibility. Now, we say "too big to fail". We are saying accountability and accounting principals are useless. When we listen to that language even to disagree with it, we are actively participating in the creation of a failing economy. The paradox is that when we let them fail, we resume fluidity in the economy. When we say yes to chaos, we find order again.

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