Global Debt Crisis Illusions Versus Reality
Interest-Rates / Global Debt Crisis Jun 26, 2011 - 03:12 AM GMTBy: Tony_Pallotta
"Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces." - Sigmund Freud
Our global society needs a reset. The insolvency of Greece or the growing US fiscal imbalance are only symptoms of a much deeper problem. It is easy for market participants to sit behind their red and green charts and point blame at "the Bernank." It is easy for homeowners to forego their mortgage payment to fund the expenses they are "entitled" to. It is easy for the Mortgage Bankers Association to "strategically default," after all it's a "business decision."
I'm sorry but "the Bernank" is not the problem. People are "entitled" to nothing and "business decisions" have moral implications.
If you witness a crime but fail to act can you simply wash your hands? If someone emotionally or physically attacks you and you fail to defend yourself are you an innocent victim? If you spill a cup of hot coffee why does McDonalds have to pay you one million dollars and write the words "hot" on every subsequent cup sold thereafter?
If the world resets its debt yet society fails to reset its moral compass then we will have done nothing more than "kick the can" down the road. We will have squandered an amazing opportunity for true "change we can believe in." We will have solved the symptom but not the problem.
The only way people truly solve problems is when they are confronted with a tragedy, whether personal or financial. When left with nothing people truly find what they are missing. Those who grew up in the Great Depression talk about what they have while those after that life changing event talk about what they want. The different views on life are small yet the implications are massive.
The solution to the world's problems is simple. People know the answer. The convict who lives on the lam for twenty years is relieved at their capture for they are tired of the hunt. People have debt they know they are slaves to. People have jobs they know brings them misery. People are in relationships they know brings them unhappiness. Yet they do nothing until they are forced to act. Until they are confronted they will continue to run waiting for the day of capture when they must face reality and begin the process of healing.
As a trader it's your fault you are losing money, not "the Bernank." If your spouse is spending beyond the family budget you have a responsibility to stop reinforcing the bad behavior. A strategic default may be a way at getting back at the bank but what about the financial damage to your neighbor.
The world is entering a very scary and dark period. We hear of hyperinflation. We hear of the end of the fiat currency system. We hear of a period of grave economic depression before us. Our illusions and our reality are truly on a collision course. The road ahead may very well be difficult but it is also an amazing opportunity to truly solve the world and society's problems. Failure to act is all of our fault and we will be forced to live with the consequences.
By Tony Pallotta
Bio: A Boston native, I now live in Denver, Colorado with my wife and two little girls. I trade for a living and primarily focus on options. I love selling theta and vega and taking the other side of a trade. I have a solid technical analysis background but much prefer the macro trade. Being able to combine both skills and an understanding of my "emotional capital" has helped me in my career.
© 2011 Copyright Tony Pallotta - Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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