Monday, November 22, 2010

The Tooth Fairy and Economic Realities

I visit a few different economic forums on a regular basis. One of my favourites is - I love that it provides articles on the micro including technical analysis and articles that focus on the macro which range from the psychology of trading to geo-political issues. I like that they have an active membership and that membership consists of divergent economic and political views. I have a learnt a lot there. Of course because it is an open forum, there are some viewpoints and comments I disagree with or find offensive. But, what the hey, I can always ignore those comments or respond to them.

But there are a few posters I just don't understand. Those are the posters that assume that this is just a temporary financial crisis and things will return to normal. Hmmm ... I don't think so. Just today Ireland is applying for an IMF/Euro bailout which will reward the insolvent banks for their bad behaviour (by propping them up) and penalize the middle and working classes by increasing their tax burden and cutting social services. Portugal and Spain are next. After that - the USA?

In any case - the Tooth Fairy. Recently, I had the opportunity to look after my 7-year-old neice and 4-year-old nephew for a week while their parents were out of town. I actually think I did a pretty good job - no cuts or bruises, kept them fed and somewhat clean and no major meltdowns with one exception.

The major meltdown came when the 7-year-old lost a tooth. Just listening to her and reading between the lines, I saw that she was questioning whether the Tooth Fairy was "real" or not. But she still wanted to believe. And somehow in her mind, she recognized that because her parents were away, the Tooth Fairy might not come - she likes science and thinks logically ;)

In the end the Tooth Fairy (moi) did come and delivered a little more than usual. My neice still is questioning but I think she has decided to extend and pretend for a little while (at least until she redeems all her baby teeth for cash).

I do see some parallels with some economic commentators and my niece. Children do not like change even though they are continually growing and changing - I think it is human nature. Some adults would like to see the economy go back to pre-crisis conditions  - or insist that it already has ... but ... I think we will need to grow and change whether we want to or not. When I look at all the data, logic tells me that we are in a sea change and may be in for stormy times ahead and to not look at, or plan for, those changes would be irresponsible.

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