No Way Out

Today I saw Bethany McLean on PBS NOW talking about the current financial crisis. Recall that she is the Fortune reporter, now working for Vanity Fair, that initiated the exposure of Enron and wrote a book about it. She points out that the big problem we face is who pays for this mess. There are no easy answers, but once government gets involved, it gets even harder. In the real financial world that most Americans live in, if you start a business and make bad decisions and run out of money, you lose along with your stockholders. Not so if the government decides to keep you afloat, however, you are now subject to scrutiny that "the market" is not usually concerned about. If your stock portfolio is soaring, it matters little if execs got obscene bonuses.

The stimulus now be worked on by Congress is a political event, not financial. Few expect that anything can be done to save 2009 and most expect that the global economy will eventually improve. The key thing for politicians is to be perceived as doing something. What we must hope for is that Obama will go beyond that and construct a compelling vision for the future.

Martin Wolf of the Financial Times provides as good an analysis as anybody. I saw him recently on Charlie Rose and he said that we do not want to return to the way things were, that is, with the US and a few European countries driving the global economy with mass consumption and mass debt. Add to that our self-defeating energy policies and you at least have a great vision of where we don't want to be.