Preventing the Next Crash?

I read the following headline this week:

crash prevention

I didn’t need to read any further because the entire idea is based upon a false premise.

I don’t know who’s more delusional — the politicians who assume that their policy ideas and regulations will be able to make everything perfect for everyone or the voters who assume that a politician will be able to solve all of our problems. 

If only my candidate were elected…

If only everyone came around to the ideas of my political party…

If only those idiots on the other side would just go away…

I’m all for people having a belief system, but far too many people act like the political versions of the perms-bears and perma-bulls. Plus, it’s amazing to me that the clowns in DC think that they can control the markets or business cycle enough to prevent recessions or market crashes from occurring. Everyone mocked the Chinese when they attempted to do away with stock market crashes (and failed miserably), but people here are very quick to believe the economic promises of politicians who know next to nothing about how the markets or economic cycles actually work.

Presidential candidates pull GDP growth numbers out of thin air and use them as a target without first considering whether or not it’s even within the realm of possibilities. 4% GDP growth sounds good; let’s go with that. They talk about doing away with business cycles like that’s just something that they can make a reality. They want to prevent the stock market from crashing or bubbles from occurring like they can control human nature.

I understand why candidates play this game. A few might be delusional, but really they’re just trying to do or say whatever will get them elected. They’re just giving the people what they want — easy solutions which don’t really exist for complicated problems.

One of my favorite parts about the Netflix show House of Cards is when Kevin Spacey’s character Frank Underwood offers a monologue to the audience to tell us all the truth about how things really work in Washington. Here’s how the current crop of presidential candidate would likely have to say if they were being completely honest with the American people, Underwood-style::

There’s no way I can possibly deliver on everything I’m promising to do in my campaign speeches. But if I make enough extreme statements I’ll be sure to get more voters who agree with me. Most of what I say comes from my team of advisors, consultants, donors and focus group research. My message will change many times between now and the election depending on how things develop. My biggest screw-ups come when I go off script and get out of character. I don’t actually believe half the stuff I’m saying. Most of the time I’m just trying to keep everyone happy and tell a large enough majority exactly what they want to hear.

If I do become president, I’ll get far too much blame if things go wrong with the economy. And if things go well, I’ll get far too much praise. Luck and where we happen to be in the business cycle when I take over will be the most important determinants of economic success under my administration.

I may have the ability to make things marginally better (or marginally worse) in the markets or the economy through some of my policy ideas, but I don’t have nearly as much control over the economic machine as most of you assume I do. If I do pass any regulations, they’ll be watered down and focused on fighting the last crisis, not the next one. And I honestly have no idea what the unintended consequences would be if we somehow were able to implement all of my ideas. No one really thinks that far ahead because we know it’s a pipe dream.

The most important person in terms of economic policy right now is not the president — it’s Fed Chair Janet Yellen. But that’s not going to stop me from pretending that I’m the great and powerful Oz, with the ability to sit behind the curtain pulling the strings on a multi-trillion dollar economic powerhouse.

How else would I get elected?

Further Reading:



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What's been said:

Discussions found on the web
  1. ɯɐɥƃuıuunɔ uoɯıs commented on Oct 10

    There’s a nuance to add here. In history, there have been a number of times when the electorate put people in power to do important tasks, and those tasks accomplished a greatly improved condition for the nation at large. However, almost all situations I can think of (eg: the creation of the National Health Service in England post-WW2) the electorate was already in a crisis, humbled, and devoid of entitlement.

    But as you point out, that’s almost never the case. It’s wishful thinking to believe sweeping reform can be made without sacrifice, but that is what gets politicians elected (eg: promising lower taxes *and* repaired national infrastructure), and why we continue to be disappointed in them.

    • Ben commented on Oct 10

      That’s valid. I’m probably being a touch too cynical here. Like most things, the truth probably lies somewhere in the middle.

        • Ben commented on Oct 11

          Staying where we are, working remotely and traveling more to NYC. Really worked out well for us.

      • John Thees commented on Oct 11

        The truth is much closer to what you said than it is to the middle. That’s why so many people are disgusted with their choices for candidates and are, at least for now, supporting outsiders for the most part. The current circus in the House only adds to their disillusionment.

    • Ben commented on Oct 11

      I listened to the Tim Ferriss podcast with him. He’s got some interesting theories. The stuff on persuasion makes a lot of sense. I’ll take a look.

  2. John Thees commented on Oct 11

    One thing I would say is that I think when people running for office refer to a ‘Crash” they are referring to an extra-ordinary recession caused by more than the usual caused of recessions – the business cycle, etc. Almost everyone who votes in 2016 will have experienced the crash of 2008 which definitely was not one of the run of the mill recessions we have experienced every several years over the past several decades.

  3. Mediclinic Counter | Vestact's – Quirk with quark commented on Oct 12

    […] I feel that companies will make a way in spite of what governments do. Another way of looking at it, governments can help make their economies efficient, thus making them stronger but trying to uplift a market when it wants to go down is a fools errand – Preventing the Next Crash? […]

  4. TKList commented on Oct 12

    New Contract With America

    Abolish tax code and IRS.

    Enact the Fair Tax.

    Minimize regulations to only what is absolutely necessary.

    Balance the budget.

    Start decreasing the national debt.

    Abolish the Federal Reserve, the FDIC and all bank regulations except one; require full disclosure on full or fractional reserve backing of deposits.

    Treat gold, silver and cryptocurrencies as legal tender (not as an asset) for tax purposes.

    End the war on drugs. Decriminalize and legalize drugs.

    Immigration reform is necessary because of inadequate immigration policy and execution.

    Abolish the Farm bill

    Give all parents school vouchers.

    Abolish minimum wage laws.

    Get the federal government out of the student loan business.

    Get government out of the health care business as much as possible. Limit them to limited regulations and financial support to those who need it.

    Obamacare, Medicaid, Medicare and VA hospitals should be phased out.

    People under these programs and those who are financially below the poverty level should be given a yearly amount that they could use to purchase health insurance.

    Keep the federal regulation stating that insurance companies have to cover pre-existing conditions as long as the person had previous insurance.

    Allow people to purchase insurance from any state.

    Deregulate state health insurance markets.

    Unhinge medical insurance from employers in the tax code.

    Getting government out and increasing competition in this way will lower health care costs. It cuts the bureaucracy costs, cuts the fraud costs and improves competition and quality of care.

    Abolish the FHA, HUD, Freddie Mac and Fannie Mae. Repeal the Community Reinvestment Act.

    Update the safety net. Have a means tested financial safety net, not a safety net based on government run programs for everyone.

    Pay employees their full pay and let them choose to who and how much of their pay goes to their medical insurance, pension fund, and long-term care fund.

    Stop letting companies, unions, cities, states and federal government mismanage and underfund promised benefits.

    Liberate the paychecks of hard-working Americans from the convoluted tax code and dictates of politicians on how to save for retirement.

    Support politicians that promise to get rid of laws and regulations that are obsolete or ineffective, instead of the ones that promise to enact more laws and regulations.

    Pass and ratify an Amendment to the Constitution to require a 60% supermajority in the House to pass any new legislation and a simple majority to repeal any legislation.

    Pass a Constitutional Amendment for congressional term limits.

    Choose limited federal government. Stop making millionaires out of our politicians and lobbyists. Stop increasing the power of connected corporations.

    • spazaru commented on Nov 13

      sounds like a right wing wet dream; no thanks