Friday, 5 August 2011

How the US Congress dithered us towards an economic free fall.

Let the bear market begin. Thanks US Congress.

The price of the US Congress playing analogue debt ceiling games may be an economic free fall in a 24/7 digital Internet world.

by Tom Thorne
The predictable has happened. The stock markets yesterday went into a deep decline. The reason: too much dickering about the US government debt ceilings by a Congress out of control and living in the past and unaware of the power of the instant internet 24/7 world.  As I write this morning, Dow Jones is down 4.3 percent. S & P: 4.8 percent and our TSX down 3.4 percent. Today, if there is no rebound before the weekend then hopefully on Monday some sense will return.
These out of touch politicians have managed to create instability not only in North American markets but also in Europe and the Far East. Their ineptitude is compounded by the fact that the European Central Bank also doesn't seem to be in much control of the debt crisis in Greece, Portugal, Spain and Ireland. The result: the entire economic world order seems to be teetering on meltdown once again.
What does it take for politicians and bankers to realize that in a world of instant communications 24/7 stupidity and old notions like the Tea Party spouts are dead meat?  What happens in an instant world is certainly not like anything the 1776 Tea Party rebels could ever envision and it seems many contemporary members of the US Congress also can't escape these old ideas. In a world of constant information you have to be constantly responsible.
In those 1776 days stupidity by politicians could only be spread by horseback or perhaps by lighting signal bonfires on hilltops. It was a communications world of Paul Revere not the instant internet.  These US Congress people don't understand what they are doing when they live in a 24/7 instant world.
Evidence of the medium is the message.
About a week ago I celebrated Marshall McLuhan's 100th birthday. McLuhan said many times that the "medium is the message". The medium in this case is our instant times and 24/7 lifestyle on the internet. It creates its own buzz. It creates its own tweets and blogs as politicians dicker and play analogue games. There is a type of instant consciousness that is the message and the politicians simply don't get it.
That message is unpredictable and very much the reason why markets respond the way they do. The only 18th Century idea that still works is the "unseen hand" of Adam Smith. Smith thought that somehow economic factors worked on their own and that they were part of the environment of commerce. He understood that the medium is the message in pre-McLuhan terms.
Change occurs when the communications environment begins to hum. Change or events fall into place not by some central plan but by the osmotic processes of humans working together or possibly apart but in all cases today aided by instant networked digital machines. Markets get their direction from an accelerated unseen hand which is embedded in this new instant medium. The message when it appears is an outcome like the current four percent drop of the markets worldwide. The medium is the 24/7 digitally controlled environment that created the situation. Truly the medium is the message.
Time is so compressed in this market place that it is also creates the medium of instant change. There is no time in a 24/7 instant environment to drag out discussions in Congress on some notion that the US Founding Fathers came up with.
In an instant world your decision making is impatient. Your trends alter constantly. Your buy and sells are influenced by computer controlled programmed trades. Guys who offer each other paper slips on the trading floors of stock markets are largely window dressing for what has already happened a few nano seconds before.
The medium is the message. Instant communications is the medium and the message is always in constant change. In this environment the markets were ready last week for the decisions the politicians thought they controlled in Washington by their final compromised agreement on US debt ceilings. Yesterday's market drop was inevitable and evidence that the Congressional agreement is largely irrelevant.
Despite the Congressional decisions about debt ceilings the unseen hand of the instant marketplace decided to  execute a downturn. In an instant communications world decisions about the hokey notions of Congressional leaders were already in play.
© Copyright 2011, Tom Thorne, All Rights Reserved.

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