Tuesday, May 11, 2010

The New Political Logic

Last Thursday, May 6th, 2010, the DJIA lost over 600 points in a matter of minutes, at one point falling nearly 1,000 points before ultimately closing down about 400 points. Today, Congress is trying to figure out "what happened" on Thursday so they can craft new legislation to stop it from happening again.

This type of investigation by Congress is what I like to call "the New Political Logic" or NPL. This is the logic of busy-body government, nosy government, hypervigilant and hyperinterventionist government. This is NOT the logic of minimally invasive, limited, libertarian government, but its opposite.

In other words, this is totalitarian government in rapidly-growing fetal form.

What is driving NPL? The economic recovery is so tenuous, so fragile and so important to the political class that it necessitates further interventions and investigations into anything that might be perceived as a threat to it. The economic recovery is like a sickly, overly sensitive child and the political class is an overbearing, anxious parent-- always checking on it, asking about it, shooing away other children, constantly sterilizing everything that might come near the child and scolding other children who carelessly bump into it.

The political class has established a logical precedent-- there is no fundamental reason for the economic and financial calamities the world keeps experiencing. In the minds of the members of the political class, there is no event or circumstance that could possibly necessitate economic hardship of any severity for any period of time. They are at war with the markets, with fundamentals and with reality as it occasionally expresses itself. They will fight it all the way or die trying.

It doesn't matter to them if the economy is so frail and the stock market so unstable in its absurd, nearly unabated recent growth that a sudden, 1,000-point drop is actually supported by economic and financial fundamentals-- they won't permit these kinds of market behaviors to occur. Ultimately, this logic leads to the idea that all downside market behaviors are a threat and therefore they must be crushed, a belief that will be realized through mass inflation. As Dick Fuld might say, they're going to "burn the shorts," whatever the cost may be-- let nothing get in the way of their fabrication of reality-as-they'd-like-to-see-it.

Don't believe me? Consider this from the NYT.com:
Federal financial regulators forged ahead on Monday to try to prevent a repeat of last week’s roller-coaster stock ride, though they had not determined the cause of the sudden, steep decline in prices on Thursday.
They don't know what happened on Thursday and they don't care. The political class is already cobbling together new regulation to make sure it doesn't happen again.

This New Political Logic is the logic of totalitarianism-- nothing out of the reach of the government, everything within it. Reality will be what they make of it, not what reality actually is.


  1. TC - couldn't agree more with your NPL concept. But reality will not be denied. While you groan that: "...the stock market so unstable in its absurd, nearly unabated recent growth..." Your "gold" chart shows that the "unabated recent growth" is not so "unabated" afterall.

  2. Efinancial,

    Let me be clear-- I believe reality ultimately can, will and must prevail.

    I sought only to explain the New Political Logic of the masters with the whips.

    Truly, the inevitability of reality is our one hope for optimism, as faith in politicians is childish and sure to disappoint.