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More Trusted Salespeople Needed

posted by Christian E. Weller

There is a serious danger that the economy will fall into the dreaded "liquidity trap" -- no matter how cheap money is, companies and families will not borrow since they are too freaked out about the future. Worldwide financial rescue packages, central bank liquidity injections, and government equity stakes in private banks are all intended to provide the desperately needed liquidity. Now, it is important to get businesses and households to borrow this money. One important step in this effort will be for trusted spokespeople to calm the fears of businesses and families over their economic futures. If the recent past is any indication, we will need a different set of spokespeople for the econmoy, though, to accomplish this.

I have tremendous respect for the secretary of the U.S. Treasury, Henry Paulson, and the chairman of the Federal Reserve, Ben Bernanke. They are financial and economic experts with decades of experience between them.

Unfortunately, they missed their opportunity to show the necessary soft touch and leadership in this crisis. How else could one explain that the U.S. Congress initially failed to meet their urgent request for a $700 billion rescue package? Congressman George Miller (D-CA) likened the appearance of Paulson and Bernanke to "Butch Cassidy and the Sundance Kid" who were demanding $700 billion "no questions asked" -- capturing much of the mood in the U.S. Congress.

Paulson and Bernanke failed to understand that the U.S. Congress and voters will have three fundamental, easily answered questions: why do you need $700 billion? Why should Wall Street get a bailout and not Main Street? And, how can the taxpayers' liabilities be limited? These questions were ultimately answered, but the delay had hampered Paulson's and Bernanke's reputation as crisis managers.

Others aren't good candidates, either. President Bush, for instance, has a reputation of painting too rosy a picture in dire circumstances and Senators Obama and McCain will be seen as trying to play electoral politics with the current crisis. This doesn't mean that they shouldn't continue to discuss their solutions and engage with the public on calming their legitimate fears about the U.S. economy. Every bit will help. It just means that we will need additional, trusted spokespeople to let businesses and families know that there is a light at the end of the tunnel and that investing makes sense.

These additional spokespeople could be leaders of industry, such as Bill Gates or Warren Buffett, nobel prize winning economists, such as Joseph Stiglitz and Edmund Phelps, or even elder statesmen, such as former presidents Bill Clinton and George H.W. Bush. Falling into a "liquidity trap" is too serious a threat to the U.S. economy to not try everything possible to get people to believe in the U.S. economy and the global economy again. What worked for tsunami relief in South East Asia may also work in economic tsunami relief -- certainly worth a try. 


For an elder statesman, whom else would the Bush's turn to other than James Baker? I know he is not an economist, but the Bush's, God bless their souls, trust him.

The challenges we face may include 'salesfolks at the top'. But, they extend well beyond that. No matter what top voice is put to whatever proposed solutions, those solutions will be dead on arrival unless they are delivered effectively through organizations, institutions, markets and networks that, in turn, are staffed by people who are themselves 'reliable' and who operate through disciplines and processes that are also 'reliable' and 'trustworthy'.

Indeed, in the absence of such delivery systems, structures and so forth, the 'half life' of 'trust' extended to the voice at the top will continue to shrink.

Even Warren Buffett would soon be exposed to ridicule if he promised Americans a way forward that was not supported by appropriate strategic, operational and implementation details.

One of the broad costs of the ideological extremism of the past many years has been the hollowing out of competence at the operational and problem solving level.

Voices at the top, while always welcome, are grossly inadequate to overcome this reality. We've got to stop looking for 'sales pitches' and start paying attention to details.

There's something really wrong when the majority of the folks in town who don't play in the casino are being asked to understand and follow the lead of the people who built and ran the failed casino.

So much of the esoteric credit market gambling made millionaires in the casino that it's more than just a little irritating to find out that the casino's failure is so large that the businesses around the block near it can't get a loan or a lease on something.

The fact that the people planning to operate the recovery are some of the very people who built the casino is also disturbing.

Since the foundation of the problem is that there is already too much debt (credit) in the economy, why should we look for better "sales people" to push more debt. That's like looking for a cuter waitress to try to get the bar patron, who is nearly passed out on the floor, to take one more drink. People, there is a hangover coming, and all the gimmicks to try to avoid it are short term, except in this scenario the drunken slobs who caused their own problem are going to get to vomit on the rest of us, clean themselves up, and walk away rich.

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