Thursday, March 26, 2009
Sign of the Apocalypse : Carville at a loss for his precious words
By James Carville
Published: March 25 2009 22:39
If nature abhors a vacuum, politics abhors complexity. There has been much discussion and some angst in the press lately about President Barack Obama’s supposed communication breakdown during the financial crisis. The breathless reports convey the impression that he has lost his communication skills altogether. One headline admonished: “Obama struggles as communicator.”
The essential problem is not how good a communicator he is but the complexity of what he has to communicate.
Mr Obama had a relatively easy time communicating the value of the recent economic stimulus package. After all, we know what bridges look like. We use them every day. And we know that repairing infrastructure creates jobs.
The same cannot be said, however, about the banking crisis that has handcuffed the US and world economies. It is impossible to break the explanation of the crisis into a sound bite or image. As someone who has prided himself on being able to reduce complex problems to simple messages, I am totally stumped by derivatives.
After hours of research, they seem to be something rich, greedy bankers thought up to make more money selling them to other rich, greedy bankers. They did not understand what they were selling. Buyers did not understand what they were buying and insurers did not understand what they were insuring. Now the taxpayer is stuck with these things that no one can explain. It is notable that the single most eloquent quote of the crisis by a flummoxed Mr Bush came in the first bail-out debate when he said: “If money isn’t loosened up, this sucker could go down.” The problem is compounded by the fact that the only people who can explain them are the bankers who created them. It is like relying on a criminal to tell us how he committed a crime – and paying him to do it.
It is not that Mr Obama is not communicating as well; it is that what he is communicating is too complex to reduce to simple words, especially when in the last 40 years, the length of a TV soundbite has dropped by 40 seconds. That being said, try this experiment. Contact an engineer and ask him what a bridge is. Or contact a doctor and ask what surgery is. Then walk into your local bank and ask your friendly banker what a derivative is.
(No need to go into the local bank Mr. Carville this humble blogger can explain what a derivative is in a 40 second soundbite. Ready? Here we go....
DERIVATIVES ARE SPECULATIVE BETS. INVESTORS BET THAT EITHER THE VALUE OF THE DERIVATIVE WOULD ALWAYS GO UP OR BOUGHT INSURANCE BETTING THAT THE VALUE WOULD GO DOWN. HOWEVER NO ONE REGULATED THESE BETS SO THE AMOUNT OF BETS GREW TO BE LARGER THAN THE SIZE OF THE WORLD ECONOMY.
THERE ISN'T ENOUGH MONEY TOO PAY OFF THESE BAD SPECULATIVE BETS AND SINCE RICH FOLKS DON'T WANT TO FESS UP TO WHAT THEY LOST, AN ONGOING DISTRIBUTION OF TAXPAYER WEALTH TO PARTIALLY PAY OFF THESE BAD SPECULATIVE BETS IS UNDERWAY...
THE RESULT WILL PROBABLY BE A WICKED INFLATION THAT WILL ROB FUTURE GENERATIONS.
ANY QUESTIONS JIMMY?
THANK YOU DRIVE THROUGH. -AM)