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COMMENTARY
October 11, 2008
Scared of shadows
While it is true that the Dow Jones Industrial Average rather plunged this week -- one of the deepest dives since Charles Dow invented the index in the late 19th century -- we might back off a bit, and look at Wall Street's performance over the last year. Over this longer period, bidders in American stock markets alone have erased more than eight trillion U.S. dollars in stock values.Not a good year for the captains of industry, but buried in that number is at least two trillion in pension funds of one kind or another. Clever, educated people satirize the "trickle down effect," but in this instance they can perhaps be made to understand that when Wall Street suffers, we feel their pain. And then we may look at the (generally worse) performances of Toronto's 300, London's FTSE, Frankfurt's DAX, Paris's CAC, Tokyo's Nikkei, Hong Kong's Hang Seng, Sydney's All Ords. If money grew on trees, this would be a glorious planetary autumn. Not only should we grasp the "trickle" concept -- when the tsunami from these securities adjustments reaches our far consumer shores -- but also, the unpredictability of all human life. I am filing this column from the middle of yesterday, and no one in the world can tell me with certainty whether the bloodletting in New York will resume after lunch, or bargain-hunting will give the Dow a late sprint. I may not need to know, but there are millions of others who urgently covet this unavailable information -- so they can bet against each other. Even the Pope weighed in, this week, with investment advice of a sort: "We are now seeing, in the collapse of major banks, that money vanishes, it is nothing. All these things that appear to be real are in fact secondary. Only God's words are a solid reality." While I am always skittish when the Vatican decides to contribute its share to the world's sound bites on breaking news, I can see no flaw in the Pope's analysis. He was referring to Matthew 7, in which Christ comments upon houses built on sand; and to the self-evident fact, that this world itself will finally pass away. We must remember that, and get used to that, for otherwise we are just crazy panicked headless roosters looking for some skyscraper to jump off. Moreover, to be Platonic about this, money is unreal by two removes, for it bears a relation to objects of acquisition not unlike that of words to things, or art to nature. It is quite abstract, it is a semblance of a semblance. And when the money is removed, and the words are removed, and the picture is removed -- the thing that they depicted is usually still there. I am making this rather recondite observation to some point. Were it not for the panic, very little would be lost. The things that we produce by our labour we may continue to produce, so far as they are needed; and the things we need may continue to be produced, in exchange. Money itself, so long as it is taken at face value, may continue to be the convenient mode of exchange. Neither now, nor in 1929, nor in any of the other times of stock plunge and bank failure, has anything much been lost, until, to use Franklin Delano Roosevelt's phrase, "fear itself" became the enemy of the people. For in practical terms, the stocks on Wall Street are not worth nothing. Formidable agencies of production lie behind each of them. When their heads have cooled, investors may sort out which are over-valued, which under-valued by comparison, and what needs writing off. The more I try to think it through, the clearer it seems to me that every "rescue plan" is counter-productive. The sorting-out process is seriously confused when the government blunders in. Indeed, the consensus of the economists I have read is that the Great Depression was largely an artifact of government intervention, reacting to a meltdown by freezing it into place. For politicians and bureaucracies characteristically mistake money for goods, words for things, pictures for reality. * In my column of Oct. 1, I wrongly stated that the U.S. Senate majority leader, Harry Reid, had tried to squeeze a renewed moratorium on oil shale drilling into the financial bailout bill the Senate had just passed. It was instead into the Senate's continuing resolution on government funding that Mr Reid tried to squeeze this moratorium (unsuccessfully). David Warren
© Ottawa Citizen
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