Corrective Action, or Blissful Ignorance?
Postedby Steve Flick on 06-25-2009
Great news! The U.S. Department of Commerce said orders for durable goods rose in May for the second straight month…
The Federal Reserve said today, at the conclusion of a two-day meeting, that “the pace of economic contraction is ’slowing’ and that financial market conditions have improved”…
In yet another sign of the recovery, a report showed “sales of new houses unexpectedly dropped last month, indicating foreclosures made existing homes more attractive…”
Forgive me for playing devil’s advocate but first, “they” are referring to lagging indicators. Second, “they” never give any details like “Where’d you get those numbers?”, a question that was curiously missing from most analyses of derivatives and credit default swaps in the last couple of years.
Third — and most important — the danger is that before meaningful long-term shifts in policy have been made, corrective actions have been taken, and really effective controls are implemented, people will get caught up in the euphoria of the moment and forget what got us into such a bloody mess in the housing and financial sectors. (“Oh, everything’s back to OK, so we can go back to business as usual!”)
“Business as usual”, as we ought to know by now, is a dysfunctional coping mechanism at best. Common sense — as well as sound business practices, guidelines, and standards like ISO 9001 — dictates that when something bad happens as has happened in the housing and financial markets over the last two years, we take action to prevent that bad thing from recurring.
If we don’t properly or adequately analyze the problem, determine its root cause, identify the best method for eliminating that cause, and take action, next time — and our collective track record isn’t terribly promising — the ones that choose to stay with the status quo must be allowed to fail.
Do you disagree?
