The newest buzz phrase on Wall Street is “Green Shoots”. Green shoots here and green shoots there and all one has to do is wait a day and watch them turn brown never to see the light of day again. So, why has there been so many false signs of economic recovery? The short answer is because we’ve exhausted the heck out of our business models. And what models they’ve been. It seems that in a systemic act of defiance the global economy looked at what a business sustainability models looked like, and went out and did exactly the opposite. This past decade will be remembered as the debt decade during which the Bigger is Better pathology combined with the lack of rules on debt repayment to cause the unprecedented collapse of capitalism in its current form. A bigger and better chrome-plated Hummer to replace your regular Hummer? No Problem. A bigger and better McMansion to replace your regular 5,000 square foot home? No Problem. A bigger credit card with a lower interest rate? No Problem. A bigger mortgage to refinance and buy the gold plated Hummer to replace the chrome one? No problem. You can’t pay for any of it now? NO PROBLEM! Honestly, how did we ever expect to sustain such vicious cycle of debt without any accountability what so ever.
In years past, such conspicuous consumption would have never been possible as the institutions that lend the money held the borrower responsible at one point. But, this time around there was a completely new lending philosophy created by Wall Street that took from grandma, China and Dubai equally, and because no one was watching, it made outrageous promises on returns and took hefty fees for itself. This new model wasn’t concerned about paying grandma back because in a style 10 times more sophisticated than that of Madoff it used money from China to pay her off and with a straight face called the whole scheme “securitization”.
This went on for years. Meanwhile both consumers and producers got used to receiving “securitized” money without ever having to prove the need for it, which made them all lazy, fat, and complacent. Yes, subservient hosts to a killer parasite that infected almost all who used it. So why are all the shoots brown? Two reasons:
1. The green seen by analysts is fuzz growing on dying hosts, and like any parasite once the host is dead, the parasite turns brown the next day.
2. The brain of this comatose patient who was created out of greed registers occasional electric activity and analysts exploit the heck out of it trying to convince us that he/she will walk again.
What Wall Street and the economists of today don’t understand is that in order for “Green Shoots” to grow into sustainable plants, you have to take the time to plant and nurture the seeds first and not be the plant thief on the observation deck waiting to cut down the harvest that never came.