Hair of the Dog

I am a teetotaler (rejected this particular form of addiction in favor of others) but the “hangover” phenomenon has always interested me. Not to sound puritanical, although no matter how I put it, it will sound exactly that, hangovers are quite the manifestation of the consequences of unrestrained behavior. I’ve observed many miserable people around me the morning after and wondered why they didn’t think this would happen the next day.

But there isn’t much to wonder there, really. I go back to my long held belief that self-destructive behavior is built into our codes. If it isn’t drinking it’s gambling, shopping, eating, being promiscuous or simply exploring newer ways to shoot ourselves in our feet, or skirt loopholes, beat the system and make beaucoup d’argent on Wall Street.

For instance if mortgages secured through subprime lenders are going bad why not create debt instruments that speculate on the number of expected credit defaults or bet on people not paying their mortgages? What a brilliant plan! All part of the same essential need to self-destruct, since exercising restraint and caution is really for the birds or, rather, the ants.

So on hangovers again, there was a very interesting article in the New Yorker written by Joan Acocella, called, “A Few Too Many”. It stated how the most effective treatment for a hangover is usually the hair of the dog and not for a reason more scientific than the fact that it diverts the liver’s focus from the processing of the alcohol binge related toxins (this is what causes the nausea, the headaches, the vomiting) in the system and redirects attention to processing the alcohol again and to creating more toxins.

I am amazed at how much the “bailout plan” is starting to sound like a hair of the dog treatment for the economy, “Give them more of the same”!

These are very interesting times in this country. If you try to think back to what you learnt in school, what your economics professors taught you, you can claw and grope for remnants of scraps of knowledge that might help you understand what’s going on but no answers would be forthcoming because they didn’t tell you about this in the textbooks you read.

If you’ve never wasted your time studying economics or finance in school but have tried to be someone who spends a little and saves a little and religiously contributes to a savings plan administered by your employer, and you expect your actions will lead to a secure future for you and your family, well, now you stare at the ticker tapes scrolling by, fist in your mouth, frozen in time.

If you never studied anything in school, if you never went to college but maintained a work ethic that led you to storing everything you had under you mattress, you probably sit on that couch that sits in the middle of a living room of the home that you were hoping to own after thirty years or in a room of your rented apartment. You crack open your beer, after a long and hard days work, like the Joe Six Pack you are, turn on the television and chance upon these people running around scared as the markets crumble and people scream about punishing greed and evil. You cheer, you say they deserve it, that it was long time coming and they got what was coming to them. You may even think you are immune to the problem since you never trusted those suckers anyway.

So now the powers that be decide that the Bacchanalian excess is over and that Dionysus needs to be banished to whence he emerged. Time to take charge, intervene, set things right; they decide that markets cannot be free anymore; time to ground the recalcitrant child.

They spend a few minutes thinking about other cures for hangover, they ponder, they deliberate; they remain baffled. Then they think of the time-tested hair of the dog. And we have ourselves the infamous bailout plan!

It is put forth as the only cure, the only plan out there that can help us dig ourselves out of this hole. No one has a better plan, there are no alternatives.

What a perfect time to witness democracy in action! Now we’re talking, I mean, really talking! In an election year, no less!

Suddenly everyone is paying attention to the talking heads on the 24 hour news cycles. So far all one had heard from the candidates was how one side would raise taxes, the other won’t, how one side would drag you down and the other will uplift you, how one side was pro-life and the other pro-death. The usual election buzz words, nothing earth-shattering, nothing new despite lip service to the word “change”; and now we had ourselves a real crisis. What fun, what will they do now?

People wait by their television sets, ears cocked, waiting for one of the candidates to offer up their plan for emerging from this crisis. Nothing, no one has a real plan. There are the usual exhortations against greed and evil and a show of support for “the cure”.

Then we see our bicameral legislature in action! This is what they mean when they say freedom and democracy! Let it ring! Now we understand it so clearly.

The outgoing President, who believes things like legacy and history don’t count because in history we’ll all be dead, warns the nation of the direst of all possible consequences, if the hair of the dog wasn’t administered immediately.

The bill is deliberated by the House of Representatives. The Representatives receive emails and phone calls from their angry constituents warning them with dire consequences if they vote for it. So many of the Representatives are up for reelection this year they cannot afford to lose their votes. No one understands the bill anyway. The economy be damned, the plan is awful, we’ve got to listen to the people who elected us, we are their voice, let’s scrap it!

The bill doesn’t clear the house. There are speeches made about coffins being placed on top of coffins, of resolute stances. The DJIA slumps by 778 points.

Then the bill gets to the Senate. Senators, somewhat removed from direct contact with the people, expected to take a longer term view of things, expected to show some foresight, add several billion dollars in tax cuts, sweeten the pot, make it more palatable to the House and send it back after passing it 74-25. The bill now sits in the house of scared representatives who wonder if the markets will crash some more if they vote against it, or if their voters will make them step down from office if they vote for it; a market that already plunged several points in anticipation of a rejection of the bill yet again. They are so keen on doing what’s right, in taking the action that will help them preserve their seats in the House of Representatives so that they can continue to be the voice of the people who elected them, so keen.

Our candidates, senators both of them, voted for the rescue bill. However, one of them was seen advocating a veto by the President if and when it cleared the House. He expects a presidential veto on a bill he voted in favor of! But nothing that candidate says surprises anyone anymore. He reverses his positions on a daily basis. Keep ‘em guessing, maybe that’s what it means to be a maverick.

Interesting times indeed!

So over the last 2-3 weeks, everyone has had a chance to wonder if the bailout is really the best idea out there. The more one ponders it, the more it stinks.

Isn’t this a world of infinite possibilities? Why not make the problem a fiscal one? Why not put in place programs that enable folks to be better able to pay their mortgages? So that the “toxic mess” gets a run through a treatment facility, so to speak. Get the toxins out, refine and distil.
But if Main Street – ers could provide seemingly workable solutions we’d all be on Wall Street!

But it is hard to believe that there really is no other way out of the credit crunch. Aren’t there enough accomplished and capable free market practitioners, like Warren Buffett, out there who can help keep their markets, their playing grounds, free, all on their own, sans government intervention? Shouldn’t the government now be asking for $692 billion because Buffett has already forked over $8 billion for Goldman Sachs and General Electric? Bill Gates, Bloomberg, Oprah…what say? This is the richest country in the world, after all.

It’s like this, you either believe in free markets or you don’t. Free markets do not rule out corrections of this nature. The corrections may be minor at times and disastrous at other times. You run that risk when you convince yourself that nothing except pure capitalism works.

If you have faith (often misplaced) in the markets’ ability to self-regulate and self-stabilize then you should let the correction ride its course and bear the consequences of your actions, silently suffer your hangover in the meantime.

What seems counter-intuitive is a myopic view of things.

We run wild…oh no…we fell…we got hurt…we need to curl up in a fetal position in a governmental womb, let mommy and daddy fix our problems, then when the coast is clear we’ll go back to raising a ruckus again.

Why not try behaving well all the time?

I know, I know, where is the fun in that?

1 Comment

  1. Wow, just incredible, the congress should forego the Paulson report and read this piece before voting.


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