For those who aren't familiar with this relatively new blog, Going Concern is the snarky online "tabloid" for CFOs, accountants and finance executives brought to you by the same folks who publish Dealbreaker (which happens to be another long-time favorite of mine).
I recently had the absolute honor of interrogating Michael Panzner, 25-year veteran of the global stock, bond, and currency markets who has worked in New York and London for such leading companies as HSBC, Soros Funds, ABN Amro, Dresdner Bank, and J.P. Morgan Chase.
If you are familiar with Panzner, you know that to call him a doom and gloomer might be a tad of an understatement. Besides his body of literary work which includes Financial Armageddon and most recently When Giants Fall, he maintains blogs by the same name (Financial Armageddon and When Giants Fall), documenting each stage of our continued unraveling.
What struck me upon first finding his work was that though he wasn’t exactly subscribed to the “unicorns and rainbows” school of thought for our inevitable future, he managed to present his vision for our destiny in a way that even the most misguided sheep among us could understand.
To call him your average doom and gloomer does a disservice to his ability to paint our path in detailed horror. Trust me kids, to borrow Panzner’s own parlance, it’s always better to know than not to know and we’d much rather you know where we might be headed instead of stumbling along blindly towards slaughter.
Keep in mind that I already knew how Panzner would answer but I do it for you kids who have no idea just how bad things might be out there. But you’re in public accounting so you should already be more than aware. Panzner isn’t trying to scare you and neither are we, it’s all about preparing for the worst and hoping for the best. Hope can only get you so far but preparation can get you a whole hell of a lot farther when the two are combined.
So the first important question is how the hell did we get here?
His answer is simple: negative incentivisation (or an absolute lack of reasonable punishments for unreasonable behavior) and an enabling mentality. He paints the analogy that Wall Street behaves like a bunch of crack addicts; instead of cutting them off of the financial crack pipe, the powers that be fed their addiction with easier money and more securitization, essentially handing over the dope to the dope fiends instead of serving their regulatory purpose and saying “enough is enough, now give me your keys and sleep it off.” The combination has, of course, proved to be deadly, at least in the financial sense.
Says Panzner, “The many imbalances that still exist in the U.S. economy and the aggressive actions that Washington has taken so far means that policymakers will find it harder and harder to keep the ship afloat without resorting to maneuvers, like cranking up the proverbial printing presses, that lead to even bigger problems down the road. Meanwhile, it’s only a matter of time before already stretched individuals and bottom-line-focused businesses either run out of resources or patience — or both — and decide to cut and run.” Meaning the dealer is running out of product, leaving the addicts stumbling around in the street unable to get their next fix.
“Constant stroking out of Washington” can only lead to a let down later on, he says, pointing out that Wall Street appears to have run out of hands to juggle the balls in the air.
“The problem now,” he says, “is that all the bullets are gone.” Monetary policy and political ammunition have left the powers that be with nothing in the chamber now that they’ve shot their load. Figuratively, we hope.
The mistake we appear to be making now is in assuming that this is your average downturn or a series of events that we’ve seen before, the sort of economic slump that academic brainiacs like Ben Bernanke penciled out on worksheets in their early doctorate years.
What they seem unable to wrap their big heads around, he says, is that this is not your traditional sort of recessionary episode. Until they accept that tiny detail, we will only exacerbate the issue, digging a deeper hole and merely staving off the real fallout when we could be better spending our time working towards picking up the pieces. Adding fuel to the fire, Panzner points out, “no one got fired and people think they beat the system.” Where’s the punishment in that?
So where does that leave us now? I guess you’ll just have to wait for the second part of our interview to find out [note: feel free to check back with Going Concern tomorrow to read the rest].
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