Searching for clarity in a world as cluttered as the one we live in today could possibly be the hardest task we face in the twenty-first century.
In trading parlance, it is known as deciphering the â€œsignalâ€ from the â€œnoise.â€
In everyday language it is called making good decisions.
The government is currently facing a massively complex decision with conflicting data points, and principles pointing in every direction.
If you believe in free markets, you should not support government intervention. But, all economists know the markets need a little nudge now and again, so some intervention is okâ€¦but not too much.
We also donâ€™t want the financial system to collapse because credit and financing is one of the central driving forces behind our economy. Should we stand behind our principles and spite our face?
What about Moral Hazard? Everyone hates that. No one wants to create bad â€œincentivesâ€ for future decisions by management.
But what does this mean really? Do we think that companies will intentionally drive themselves into the ground so that they can receive $10 / share rather than $0 (as was the case in Bear Stearns)?
People should face the consequences of their own actionsâ€¦but what if said consequences were unpredictable by anyone? If I step outside my door and a satellite falls from the sky, am I responsible? If I am a Nasa satellite expert might I be?
We should ensure that the American economy remains the strongest in the worldâ€¦but if we couldnâ€™t predict the repercussions of securitization and its spawn, how can we predict what the impact on the USD will be from these bailouts? Is Ron Paul right to worry about a collapse of the system entirely? But isnâ€™t he being pessimistic? What about my argument below about taking our chances with ourselves in the drivers seat rather than foreign owners?
In times like these, it seems best to sleep on it and see what tomorrow brings. Unfortunately, the decision-makers and market participants are in a frantic race with night-filled negotiations to try to predict the best possible outcome.
I genuinely appreciate that effort and their attempt at crafting the best possible solution.
It is also in such trying times that the foresight of the founders of our nation are put to the test. They created a constitutional arrangement that has heretofore allowed us to be the greatest nation in the history of the planet.
And so, I reluctantly admit I donâ€™t know what the best outcome is. I donâ€™t know what the government should do. I wonâ€™t give up trying to figure it out, but the best I can hope for today is to trust that somehow, through some collective wrangling and wrestling some kind of clarity will come out of this mess.
And, thankfully, tomorrow is another day.