The Sovereign Society Offshore A-Letter
Wednesday, March 11, 2009 - Vol. 11, No. 64
Pity the Saucer-Men:
For They Know Not Where They’ve Come
Dear A-Letter Reader,
Uncover the Mystery and Discover the Truth! (or so the website says)
This year’s week-long UFO convention is slated for Vegas in July. And some of the regular attendees are hoping for some… “extremely foreign” guests.
As for the existence of intelligent life outside of this little Blue Planet, we can’t say. But if aliens do exist…and they chose to visit us right around now…
Well, we’d feel pretty sorry for them.
A Day in Bizarro World
Confusion and Dismay are the reactions we’d imagine.
For they’ve come to a planet where rules and regulation mean mayhem…where “laws” mean off-the-hip decisions…where competition is subsidy…and the world’s largest insurer is also the world’s largest gambler.
They’ve come to a world whose people would all admit we face a state of global crisis, and yet “our” governments frantically engage in massive, untested remedies at the risk of making it all terribly worse.
They’ve come to a place where the businesses of a single street– where the wall once stood – can pay a relatively trivial sum of American currency to the government (in the form of noble contribution), and in turn foist their tremendous debts upon generations of the nation’s public.
Perhaps our visitors would rule out “coincidence” there. They might even say we got a raw deal.
If nothing else, our world would fascinate them. Maybe even make good material for their schools…
“Alright now children…what did we learn from the FDIC’s insurance rate hike in the early months of 2009? Yes, Bobby.”
“We learned that small regional banks would be punished for the weak balance sheets of the country’s superbanks. The superbanks were much worse off, and the FDIC raised its rates because of their solvency issues. But the raise in rates would raise operating costs for all banks…even the well-off regional outfits. It’s a perfect example of unintended consequences. When the government intervenes to aid one company, it often does so at the risk of harming others.”
Sharing a Coffee with E.T.
And if you manage to convince a “visitor” to share a coffee, it probably wouldn’t be a good idea to take them to Starbucks. You’d already have enough to explain without four-dollar-coffee.
“I mean, what it comes down to is healthy businesses doing healthy business,” they’d tell you over an Orange Mocha Frappucino, “that’s what you need to recover. And trust me…we even struggled with varying degrees of government intervention during crises. As long as there are greedy people, it’s likely to remain a necessary evil.”
“But it takes a master’s touch…because you’re always playing with an unexpected set of possible consequences. Help one company because you believe they pose a catastrophic risk, and you’re likely to hurt their competition. The worst part? Their competition is the healthy companies…the responsible companies. So it’s always a double-edged sword.”
“Like that report you showed me…that AIG was offering more competitive rates on life insurance than their healthy un-subsidized competition. Or the other one…where Warren Buffet’s company – one of only seven remaining AAA credits in the country – is paying more for credit than questionable, government-backed competition. In both cases, the healthy suffer…maybe even as much as the sick benefit.”
“And you simply can’t have these types of things happening without a major loss of confidence across the broad economy. Be mindful of your confidence in times like these…it’s the thread holding you over the void.”
Maybe you personally muster the confidence to ask them how they deal with crises like this one.
“We don’t have them.”
“What?! Why not?”
“We don’t let our companies get big enough to pose catastrophic risk in the first place. That’s just bad management. Either you regulate them all the way or not at all. And you actually have to enforce those rules too. The whole idea that banks can trade in unregulated instruments – like Credit Default Swaps – and still enjoy the protection of FDIC insurance…that’s just doesn’t work.”
They’d likely go on to tell you that despite the mayhem and uncertainty, there are still a few serious opportunities out there. You’d have to look harder…and find some specialized help.
“But you can still find immense profits from picking up business that the incapacitated superbanks are leaving behind…simply lending capital to productive and capable parties. It’s that easy. Funding is in short supply, and people are paying handsomely for it.”
Or, they might go on, “You could also trade in ‘coin-of-the-realm.’ The fundamentals might be ‘on-hold’ at the moment, but some powerful trends are making for huge profits in foreign exchange markets. There’s always a bull market somewhere in currencies.”
Maybe they’d have better advice than we can dream up…we certainly hope they do.Because in these new times – where up is down, left is right, and you wouldn’t know your government from a hole in your pocket – …well, let’s just say it’s gotten a lot harder to see what’s around the bend.