From the beginning of the current financial crisis, many officials have been insisting that a big part of our problem is "confidence." Remember back when the $700 billion bailout was supposed to inject "confidence" into the financial system?
I can't help but think of another definition of "confidence" -- as in a confidence, or "con," game. When you think about it, trying to gain someone's confidence in order to grift them out of their hard-earned dollars really isn't an outlandish metaphor for our current situation.
The nationalization of spending
The parade of moves that the Treasury's Henry Paulson and the Fed's Ben Bernanke have made over the course of 2008 are dizzying in their complexity, expense, and confusion. The latest is the bailout -- basically, the nationalization -- of Citigroup
While the nationalization of corporations bothers me deeply on a philosophical level, other recent plans bother me on a more commonsense level. The Fed and the Treasury announced $800 billion extra, including a portion meant to stimulate consumer spending, including credit cards, auto loans, and student loans. Again, it has long been clear to some of us little people that the major problems our economy faces are due to way too much easy credit -- and easy credit's best accessory, short-term thinking.
The Fed and the Treasury continue to be hell-bent on doing all they can to persuade consumers -- many of whom are already far over their heads in debt -- to continue spending money they don't have. There's something downright morally reprehensible about that, but some seem to believe that's the way the economy can be "saved." We're all supposed to dig ourselves in deeper -- and of course, given the government's soaring deficit, it's doing the same thing.
Who's naive, again?
Meanwhile, some of us feel like we've gotten mugged, since the Troubled Asset Relief Program (TARP) so far has not worked according to its intended plan, which was to unfreeze credit. (I'm still wondering if the real problem is that banks realized that it is, I don't know, kind of unsustainable to lend to those who probably won't be able to pay it back.)
Henry Paulson then said it was naive to believe the TARP would work quickly. It's funny, but if I were a guy who had pushed the panic button, then repeatedly changed strategy while throwing around hundreds of billions, I don't think I'd be calling anybody naive. And of course, Paulson's insistence earlier this year that the economic problems were contained and controllable should definitely sound naive to those of us who already figured our overheated economy was due for a whopper of a recession.
I also can't forget Bernanke arguing during the bailout controversy that if we didn't get TARP there would be a recession. This seemed strange to me at the time -- I strongly suspected we were already in a recession back in April, despite so many people's assurances we were not. And just today, the National Bureau of Economic Research has announced that, guess what, we have been in a recession since this time last year. Will wonders never cease?
Confidence vs. common sense
Call me crazy, but consumers shouldn't feel so economically confident, particularly since their wallets are stuffed with cards bearing the logos of Visa
Neither should the people who pinched, scrimped, and saved their money and are now getting no return on their savings due to aggressive interest rate slashing. (And of course, let's not forget the inflationary effects of the money printing presses working overtime.) These are the people who refused to buy into the housing bubble and now can't even buy cheap real estate, because the government is so determined to prop up housing prices for everyone who bought into the collective economic delusions that got us into this mess.
The bailouts need to end, as more and more companies line up for government help: homebuilders like Toll Brothers
If anything, I think it's high time our culture takes a break from some of the misguided "confidence" it has exhibited for quite some time now. The overwhelming message seems to be that we all need to spend our economy back into growth, but if we read between the lines, it's clear that growth over at least the past decade has been artificial, fired up by debt and a "confidence" that had no grounds in realistic measures like "income."
The policy appears to be to do everything possible to try to keep the natural correction from occurring -- although many of us believe it must occur for our economy to be healthy again -- and insist that everybody be confident, for Pete's sake. With all the talk of confidence, one good question might be why we should feel confident in a system that is propping up bad decisions and policies and even encouraging people to repeat the mistakes that got us here.
That's when it's easy to wonder if it is one heck of a confidence game, indeed.