It was only about 4 scant months ago that I wrote a column about China and the real and present dangers it presented to the global economy. And here we are on the edge of the meltdown, watching as the Chinese stock market drops and drops in value.
Nothing seems to help during this latest flurry of devaluation on the Chinese Stock Market. The automatic circuit breakers halted trading on two separate occasions before the Chinese government concluded that they were doing more harm than good. The market then proceeded to tank again. And despite all this turmoil, the central government keeps beating the drum that growth in the economy is still on pace for 6-7%.
Meanwhile, back in the United States, many market participants on the NYSE or NASDAQ have lost their collective heads and have begun selling everything off in sight. Of course, cooler, less-emotional heads are buying and at a discount but it looks like the public at large doesn’t care. There is an old saying, which goes something like “the beatings will continue until morale improve”, that applies here.
I bring up these crazy, irrational responses as way of a prelude to the main point here. Human behavior gets muddled when strong emotions are roiling under the surface. Nothing new there! And few things engender strong emotions as much as money – or more precisely the freedom that having lots of money implies. But the less-cynical-me had hoped that paid professionals in both the financial and media sectors to be able to detach emotion and discuss objectively.
Anyone with common sense and the ability to keep their emotions in check would have been able to warn that the ‘China miracle’ was anything but. There was no shortage of voices who were questioning the Dragon’s wisdom in constructing high-rise apartment buildings in which no one lives, or the raising of large malls where no one shops. And yet, China’s ‘new economy’ made headlines all over the world.
Even now, with the precipitous loses of the last two weeks, the best that seems to come out of ‘money reporting’ are tame and vapid pieces like Heather Long’s Why China doesn’t know what it’s doing. Ms Long’s lead in reads
Huh? When did China ever know what it was doing? I’m willing to bet that she is someone who would dismissively scoff at the ordinary sorts of miracles that those religious ‘country bumpkins’ accept.
Later in the piece she is willing to ask the question
I would love to see what she would have said if she were reporting on the pyramid scheme of Bernie Madoff. Perhaps her text would read
And so the more-cynical-me jumps to a conclusion that it wishes to share. There will always be buffoons in the market, like rubes in at the circus. Eager to see something new or strike it rich or whatever, they are willing to suspend not only disbelief but common sense. They are quite willing to look the other way while their pocket is picked clean. Some members of the financial industry and of the intelligentsia in the media aid in this shearing by acting as either side-show barkers or as those encouraging bystanders who tell us “What have ya got to lose.” Other members act as the ‘friends’ who consoles us with platitudes about it not being our fault or how could we have known or it was just bad luck. Only a few, honest ones continue to tells us that there is no such thing as a free lunch. I just don’t think many of us will ever listen those guys.