FINANCIAL HUMPTY DUMPTY

For as long as we can remember we've been saying academics don't live in the real world. People for the most part are extensions of their upbringing. For economists it's their econometric models and Keynesian theories.

There's a difference between academic and real worlds, one most academics never seem to get. People don't always act rationally. In fact, an interesting thought might be what if irrational is the norm, at least in certain situations? Whoever dreamed up the rationale for putting a human being behind the steering wheel of a 2000 pound part metallic object that can exceed 100 miles per hour speed?

Yes, we now have behavioral economics. But that get's modeled also. If you start with a false premise it's likely any conclusion you come up with will also be false. The biggest false premise of all just might be human behavior is understandable. So we come up with exceptions and excuses like neuroses and such--iconoclastic, eccentric or just plain different.

These might make us feel better, but that hardly makes them facts. In the stock market most investors disdain volatility. Volatility is to chaos as psychology today is to people. You find one you'll find the other. So why wouldn't China which has been the locomotive for a large part of global growth the past decade or so doctor it's GDP numbers once the economic winds start to leave those sails?

It might surprise you, but China is run by people, too, people who wish to not only stay in power but consolidate that power. The meme that we in the Western world are any different is just that--a fanciful meme officials hope the gullible with continue purchasing. Don't forget every generation brings with it a number of the new gullible set. Some believe that if China's GDP numbers were any more doctored they'd be a shingle hanging outside a new office building.

For those who care to carefully look few of the basic problems that punctuated this mess have been corrected. A cynic might say none. Swept under a convenient carpet or just kicked down the road, that's still the official solution of the times. Wallpaper it over. You know that by the growing attack against austerity. The globe is awash in debt and nobody dares to stick his finger in the dike. That's akin to cutting your throat just to watch yourself bleed. In the ken of politicians and bureaucrats hemophilia is an afflictions only for the masses.

So the debasing continues. Not just the currencies, but the social, political and educational. Rumor has it Diogenes picked up his lantern one dark night and strolled out into the blackness searching for an honest soul. Somewhere he made a wrong turn and wound up in Washington DC where after just a few minutes he tossed his lantern away and, reportedly was heard to utter: "Screw it!"

That's what more and more people around the globe are saying today. And there will be tons more once this financial Humpty Dumpty falls. It's the hard landings that crack the egg.