Friday, May 1, 2009

Of Nero and Fiddles

One of our favorite historical tales features the Roman Emperor Nero, who ruled during the years 54-68 CE. It was during his reign that the Capital was ravaged by what later became known as the "Great Fire of Rome". As implied by its name, this fire was particularly destructive, decimating a substantial portion of the City. According to the lore, during the fire, Nero was spotted on top of a hill overlooking Rome, playing a fiddle while the City burned to the ground. Nearly two thousand years later, remnants of this sort of behavior still exist.

The "fiddlers" of today are the chief economic policymakers of the United States. Instead of playing a musical instrument, these individuals are aggressively pushing a storyline that contains, as its foremost element, a concept described simply as "green shoots". The media has been complicit in the advancement of this fable: one morning while perusing a rather well known newspaper, we noticed that across two consecutive pages, there were six separate articles. Every article invoked the term "green shoots" in either its Headline or Sub-Headline. 

The "fire" at present is the financial system, which continues to deteriorate. The most recent flare up is the somewhat under-reported trouble at Syncora, a provider of debt guarantees, or bond insurer if you prefer, with Total Assets in excess of $5Billion. New York State insurance regulators have literally compelled Syncora to cease all payment of claims until the Company can reduce its liabilities to a more manageable level. Presumably, New York will attempt a Chryler style Creditor Coup in order to avoid bankruptcy proceedings.

Our primary issue with this latest strategy is simply that the Government's hired economic hands know better. While they may misspeak in public occasionally or fail to fulfill their tax liabilities, these men are not obtuse beings when it comes to reading the economic tea leaves. We would classify the current developments as merely part of a larger strategy-one that has been conceived for the purpose of allaying public discontent for a minimum of two years. The reasoning is simple: as long as the public perceives a recovery to be close at hand, overall levels of unrest will remain minimal. The prosecution rests.
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