In 1983, screenwriter William Goldman (Butch Cassidy, Marathon Man, All the President's Men, Princess Bride, et al.) wrote Adventures in the Screen Trade, a brilliant and entertaining analysis of the movie industry. His unforgettable takeaway line that summarized the entire 436-page book, the phrase that captured the essence of Hollywood, and now the single best explanation of why we're in such a economic mess: "Nobody knows anything."
Who are the nobodies? Well, there are the CEOs, the Treasury, the Fed, the Congress, the Administration, the SEC, the other regulators, the journalists, the investors and the voters. Did I leave anyone out?
You probably never thought that Hollywood's moguls and the Masters of the Universe had so much in common, but they do. What else could account for this fiasco? Bill Goldman's phrase is the perfect answer to the question that everyone is asking - why? Simple. Nobody knows anything. Yet while so many know nothing, never have so many been paid so much to do so much harm.
As we enter this New Era of financial reform, we're faced with one really dangerous law that our nobody-knows-anything economic leaders will incorporate into the new legislation/regulation/fiat that is being foist upon us. This law requires no majority in congress and no presidential approval. But it will be enacted. The law, of course, is the Law of Unintended Consequences. That law will be the only sure thing to emerge from the tortuous process now going on in Washington.
New words to add to your crisis vocabulary
"Credit-default swaps." A buck if you can explain what a credit-default swap is. I can't. But I learned from the Wall Street Journal that it's "a complex type of investment that acts like an insurance policy on loans and bonds." Of course. Now I understand. By the way, this (now-simpler-to-understand) instrument has grown this decade from almost nothing to over $60 trillion. Trillion! By comparison, the GNP of the U.S. is a puny $14 trillion. Which gives rise to the next new word in our crisis vocabulary...
"Trillion." The late Senator Everett Dirksen is perhaps best remembered for his comment in the 1960s on the mushrooming government budget: "A billion here, a billion there, pretty soon it adds up to real money." (What would he think of $700 billion here, $700 billion there?) So for those who can't comprehend what it a trillion is, it's simple: a thousand thousand thousand thousand. That doesn't help? Well, think of it this way. Those of us who are aging like to pretend that 50 is the new 30, and 70 is the new 50. So try this: trillion is the new billion.
"Toxic." In the press, we no longer see the word "mortgage" all by itself. It's "toxic mortgage." To remind us all of what we're dealing with, toxic means poisonous, virulent, noxious, deadly, dangerous, harmful, injurious, pernicious.
"Privatizing social security." This is a phrase that you can delete from your vocabulary. It no longer has any meaning.