Money Sage

We read endless "analyses" and "forecasts" of future monetary, fiscal, currency, commodity, and financial market trends, all of which, irrespective of their conclusions, share in common a STRIKING DISREGARD for the role of key personalities on the decision-making process. This, it seems to us, constitutes a profound and probably fatal failing in all analyses built upon a structure of history, statistics, and computer modelling.

Illustrating the DECISIVE ROLE of personality and character strengths and or weaknesses upon decisions of profound moment is the recently published analysis of the Battle of the Marne. In this astute and extemely well documented book the author ascribes -- properly we think -- the critical and, in some respects, incomprehensible failure of German arms during the crucial first six weeks of World War I to the LOSS OF NERVE of the key decision-maker, in this case, the Chief of the Great General Staff, Moltke. Other factors played important SECONDARY roles, but with a strong and active chief of staff, these frailties would have been transcended and German arms would likely have triumphed, with profound consequences for European, and, indeed, global history.

In the realm of economic forecasting and monetary policy, future currency, and financial market trends, and economic and financial OUTCOMES analysts are pleased to confine themselves to statistical and computer analyses, with SELECTIVE references to financial and economic history intended to bolster their analyses and prophecies. However, the critical role of personality is largely ignored.

In the last great financial system and economic crisis, our own country, as well as the world, were decisively influenced by personality:

--the weakness and conciliatory approach of the chairman of the FED in 1929 and subsequently;
--the critical role of the French politician, Pierre Laval, in torpedoing the proposed European loan to save the Credit Anstalt, whose consequent failure led to the global collapse of the banking system in 1931, and the consequent Great Depression;
--the neurotic fixation of the Governor of the Bank of England, Montagu, on maintaining the gold standard at all costs;
--the role of Roosevelt in providing hope to a public both desperate and suffering from a profound loss of confidence in the economic, financial, and political system.

The list, in truth, goes on and on.

In the current and unfolding future situation, we must therefore consider very carefully the personality, the character, the strengths and weaknesses of those at the commanding decision-making heights: Bernanke, the FED governors and regional bank presidents, Obama, the congressional leaders. The decisions that they make -- or do NOT make -- will have huge impact upon the future course of events, regardless of what economic history, statistics, and computer models suggest.

In this context, we must note the following perceptions of ours:
--Bernanke's demonstrably poor forecasting abilities;
--Bernanke's deep-seated aversion to regulation of the banking system and the financial markets;
--Bernanke's demonstrated intellectual failures on issues of cosmic importance within the monetary policy and economic realm;
--Bernanke's rigid fixation of preventing another Depression AT ANY COST;
--Bernanke's deeply entrenched tendency to engage in wishful thinking at to grasp at straws, all to DENY the profound and lasting negative consequences of his idee fixe, and the policy to which it has given birth.

As for Obama, leaving aside his profound ignorance of the matters under discussion, our president has demonstrated determination in one, and only one, area: enacting his socio-economic agenda irrespective of the cost to the future financial stability and solvency of the country. As for the rest, he is satisfied to allow Bernanke, Geithner, Summers and other Wall Street-oriented advisors to make the policy decisions. Increasingly, Obama reminds us of Ramsay MacDonald, the socialist prime minister of Great Britain during the interwar period. MacDonald's transformation into an admirer and seeker of admission into the British aristocracy once he moved into #10 Downing Street is perhaps being replicated by our own president.

Foreign central bankers and governments are not much better, it would seem: the general fright at the prospect of a deflationary depression has led them to throw all prudence, caution, and moderation aside in their frantic search for a soft landing -- soft for the current reigning crop of politicians, for the great financial institutions, and for their own career. The bill for their "services" will be rendered in no uncertain terms in coming years. It may well be the judgment of history that they have all sold their nations' patrimony for a mess of pottage.

Moneysage 2009 - copyright