While vetting some clips for this week’s BNN lineup it became painfully obvious to me that, although the consensus tide is slowly turning on many formerly fringe notions such as the existence of a national housing bubble, the impending mortgage-credit meltdown, or the absurdity of various containment arguments, those who would knowingly “spin” our current economic predicament in either an attempt to protect their own self interest or simply as a foolish prescription to stave off a national case of the “R-word” blues, have in no respect abated.
Whether it’s a fully invested Wall Street insider, a paid analyst, an economist, an actor who fancies himself an economist, a business channel pundit, a residential real estate-mortgage industry insider, a whole host of real estate industry trade associations, misguided administration officials, a tired old Fed chairman or an obviously struggling new one, there is no lack of individuals willing, for one reason or another, to push for optimism in lieu of accepting realism.
Now don’t get me wrong, I’m not suggesting that there is literally no wiggle room for interpretation.
Although my hunch is that the economy is headed for a pretty rough patch (i.e. hard and entrenched recession), I’m still aware of the fact that, on such matters, the exact outcome is in no way a foregone conclusion.
But what if an oncoming hard landing is truly all too obvious?
The list of bright flashing warning signals is a mile long (and getting longer everyday) yet it seems to me that consensus is continuing to play a dangerous game of denial that, years from now, may be interpreted as easily contributing to needless losses for many millions of individuals.
When supposedly credible authorities and organizations portray our current circumstances with optimism and skepticism of the obvious worsening trend, there is a solid chance they are affecting the behavior and actions of the many onlookers.
From the Federal Reserve continually pushing the notion of contained fallout from the housing debacle to the National Association of Realtors (NAR) shamelessly urging on home buying activity even in the face of dramatic weakness and depreciating home values or even foolish zealots like Ben Stein suggesting back August that there would be no real losses from the subprime meltdown, the message may be the same to many, that is… no need to be concerned… go on about your business… nothing to prepare for.
It’s exactly this lack of preparation that, like the related and equally dangerous collective behavior pattern of “over doing it in the first place”, will contribute to making any coming downturn significantly more severe.
So, are these optimists and charlatans creating in effect an “immoral hazard”?
That is... by purposefully or otherwise sidestepping reality, has a perception been created (and continues to be created) that has inevitably resulted in the economy’s participants feeling insulated from risk, thus preventing them from acting responsibly and fully accounting for the risks and consequences of their actions?
