The Battle for Our Financial Future

By Todd Harrison  AUG 02, 2012 11:20 AM

Policymakers take aim at free-market capitalism.



Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Do you remember watching professional wrestling as a kid?  There used to be steel cage matches that locked two behemoths in the squared circle — two men entered; one man left.

Such is the case in the modern-day financial markets.  In one corner, global central banks have done — and seemingly will do — “whatever it takes” to stave off crisis.  In the other, undeniable structural imbalances continue to build.

The battle continued this week as the Federal Reserve hinted at another round of stimulus while the European Central Bank signaled that it will partner with governments to buy sovereign bonds in an effort to reduce interest rates. 

ECB President Mario Draghi opined that a “severe malfunctioning” in bond markets “needs to be addressed in a fundamental manner.”

I’ve learned a few things over my 20 year career and one of them is that the markets are never wrong; price is the arbiter of variant views.  Nobody is bigger than the markets; while they might be manipulated, free will can never be caged.

Today’s root issues — too much debt, rampant under-employment, and underwater mortgages — are symptoms of the economic condition, not the causes of it.  While policymakers may be well-intentioned, it’s never wise to mess with Mother Nature.  

One day, our grandchildren will study this era and ask what it was like to live through The Grand Experiment.  We’ll likely share the importance of perspective, the virtues of meritocracy, and the wisdom that capital preservation is the first step toward wealth accumulation.

Random Thoughts:

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Twitter: @todd_harrison

No positions in stocks mentioned.