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Generational Dynamics Web Log for 28-Sep-2008
Washington officials to spend Sunday evening watching Asian markets

Web Log - September, 2008

Washington officials to spend Sunday evening watching Asian markets

The details of the $700 billion Bailout of the World (BOTW) plan are now being evaluated by investors around the world.

The fight is not yet over, but there's a basic agreement in place. According to the plans, it will be debated in Congress during the week, and passed as a bill by the end of the week.

The American public is overwhelmingly opposed to the BOTW -- by something like to 300 to 1, according to what I've heard.

The two Presidential candidates completely punted on this question during the debates. Their scripted answers threaded the needle between not endorsing anything so unpopular, and not rejecting something that might save the world.

In fact, there's one overwhelming fear in Washington that's so great that it overshadows everything else and makes everything else almost irrelevant. It's not a great fear of economic meltdown: It almost seems to be taken for granted that some kind of economic meltdown is in the cards. No, the greatest fear for each of these Washington officials is the fear of being blamed for the economic meltdown.

In listening to the commentary for the last few days about the BOTW, the most telling thing that I've heard was the answer by Treasury Secretary Henry M. Paulson Jr. to these questions: "Why are we in such a rush? Why can't we do this in stages? Why do we have to approve the entire $700 billion in just a couple of days?"

The answer: "We have to restore confidence to the markets, and we need the full amount to do that, and we have only a couple of days to do that before we face disaster." (This is paraphrasing, but that's essentially what he said.)

As this weekend progresses, we've been faced with a familiar deadline: The bailout agreement has to be reached by about 7 pm ET on Sunday, because that's when the markets are opening Monday morning in Asia. 7 pm Sunday ET has been a do or die deadline for several recent weekends.

And listening to the pundits this weekend, they're all going to be holding their breath watching the markets on Sunday evening and Monday morning.

"If it doesn't work, then we face disaster on Monday, but I don't think that's going to happen," said one.

The phrase "doesn't work" means "doesn't restore confidence to stock market investors."

There's an airhead quality to all this discussion. There's no connection with anything real. It's not exactly like playing a move in a chess game ("If I do this, he does that, then I do this.")

It's more like a big poker game: "I've lost every bet so far. This time I'm going to go all in, and bet every penny I have on the next turn of the card. I hope this works."

It's hard to overestimate how incredible this is, since it's not a poker game. The prevailing view in Washington is that the fate of the entire world economy hinges on the turn of a card, and I don't think that there's anyone who even claims to have any idea which way that card is going to turn.

And so, everyone in Washington is going to be paying rapt attention to the markets on Monday, because you have to be a very nimble player to avoid the greatest catastrophe of all -- being blamed. (28-Sep-2008) Permanent Link
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Generational Dynamics Web Log for 28-Sep-2008 Washington officials to spend Sunday evening watching Asian markets

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Generational Dynamics Web Log for 28-Sep-2008
Washington officials to spend Sunday evening watching Asian markets