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Hernando Today

Connecting The Dots

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JOHN REINIERS Guest columnist

The Tampa Tribune

Published: December 13, 2008

Every year lexicographers publish their annual list of of popular words or phrases they would like to see expunged from our lexicon. I have to admit "connect the dots" is getting a little wearisome for me.

Primarily because it got overused in political speak. But the concept has value because it forces you out of the box whenever you are too lazy with your thought processes. The "dots" could and probably should take you anywhere. Politicians use the phrase smugly to suggest that the dots logically go in only one direction - whatever comports with their biased linear thinking.

The history of ideas suggests otherwise. Connecting the dots means to think for yourself which then leads to knowledge which in turn leads to practical application. Johann Heinrich Pestalozzi, Swiss educator (1746-1827) said it well: "One may see and hear and read and learn as much as he pleases; he will never know any of it except that which he has thought over ..." It's the thinking it over part that gets dots properly connected - and this doesn't mean just rearranging your prejudices. It means original thought.

The first economists, such as 18{+t}{+h} century Adam Smith, were philosophers, and like most good philosophers, they did try to connect some serious dots. But these "dots" couldn't comprehend modern science, computer technology, nanotechnology, public education, the Internet, and the list goes on.

Times were simpler then. But they sent a message to the 21{+s}{+t} century that thinkers had to think beyond their comfort level (usually their narrow field of expertise). "Connecting the dots" is as a helpful metaphor to make us realize that every thought - every idea - is in play and interconnected - not unlike the modern day global interconnectivity of economies.

But it is impossible for any one expert to get his or her arms around all the pieces in the universe of human activity. Smith is interesting, not because he is now considered the father of modern economics, but because he tried to integrate morality, ethics, jurisprudence and politico-economics into a coherent whole. That is a much taller order in the technologically complex 21{+s}{+t} century.(Interestingly, he never used the word "capitalism.")

With all this in mind it still flabbergasts me that our current financial crisis even occurred. It is now global, so all the great intellectual economic wizards worldwide had to have some clue to what was unfolding over the years before their very eyes. It is an oversimplification to say it was a fantastic speculative boom or the result of infectious greed.

The dots were there for years, so to speak, and pointing in the right direction (to be more precise - the wrong direction): over leveraging, opaqueness and naïve government social policies.) If you watch all these experts testify before congressional committees, and you aren't a trained economist, like I am not, you have to conclude: Where were these guys when the unsustainable housing boom, which had it's genesis in the Fannie Mae - Freddie Mac Utopian scheme - which defines socialism - was under way? (Even Bill Clinton agrees they helped create this mess.) "Liar" loans were given to people who were not credit-worthy, and to question their ability to make the mortgage payments was considered either racist, or anti-Latino, or unfair discrimination against less fortunate "under-served populations."

There is some humor to this. Americans are loathed worldwide for taking down a mass murderer - Saddam Hussein, and encouraging a nascent democracy in Iraq. But where is the loathing over the American created financial crisis which morphed into a worldwide recession?

Fannie and Freddie were bundling up these mortgages into derivatives since as far back as the savings and loan crisis in the 1980s. What is particularly galling is when Gao Xiqing, (Duke law degree and Wall Street lawyer), president of the China Investment Corp. who oversees American holdings which tanked during this crisis (they finance much of our debt) was asked to explain to the Chinese State Council how American derivative investments worked. The Atlantic reported in their December issue that he was struggling how to explain this to people in government who didn't have a financial background. He decided to use a "model of mirrors." Imagine you have a book to sell. This is worth something because of all the labor you put in it. But then someone says, "I don't have to sell the book itself. I have a mirror and I can sell the mirror image of the book. That's a stock certificate ... I have another mirror - I can sell a mirror image of that mirror. Derivatives. Then you have 10,000 mirrors ... People start to believe these mirrors are the real thing ..."

Here's a Chinese guy who connected all the dots and told his government that these American instruments "are bull---t. They serve to cheat people."

Now that the election is over and the Democrats are still safely in control, they have agreed to hold hearings, so all the dirt is coming out. It should be hard for them to simply vilify the crooks at Fannie and Freddie without sullying their own reputation as well,and the wisdom of their legislation which started this mess.

Then there are the government Wall Streeters. I have no doubt that the incumbent Treasury Secretary, Henry Paulson of Goldman Sachs fame (and his staff) is eminently qualified. But now Barrack Obama has nominated equally as well qualified experts, some from Goldman Sachs.

These experts from Wall Street are all clones of each other. In fact even going back as far as Clinton's people (Robert Rubin), they all came from the same failed investment banks who peddled these derivatives worldwide. Remember Pestalozzi's advice? One really doesn't know anything they hear, read or learn - until they think it over.

Well think it over. Connect the dots. They are all from the same old boy investment network. Party affiliation is immaterial.

None of these guys make things like computers or industrial equipment. They just make a lot of money for themselves.

Luther Burbank (1849-1926) botanist and inventor, who revolutionized agriculture and food production, observed that "Less than 15 per cent of the people do any original thinking on any subject ... The greatest torture in the world for most people is to think."

Somebody has to start connecting the dots.

These 15 percent who will, surely aren't in Congress - or we wouldn't have these boom-bust cycles every 10 years.

John Reiniers, a regular columnist for Hernando Today, lives in Spring Hill.

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