Many of those observing the debates in Washington and Brussels have compared our fiscal issues to household finance, complete with kitchen table discussions, bill-paying, and saving for a rainy day. But to my mind, it’s the language of flight that is more telling.
Economies buffeted by turbulence, approaching stall-speed, policymakers at the controls, trying to avoid a crash or a hard landing—these are all images from the flight-deck. And like the most successful pilots, policymakers with poise and experience will make all the difference to the outcome of today’s trials. Think of “Sully” Sullenberger and the Miracle on the Hudson in January of 2009. Officials face three distinct challenges.
- Deleveraging is sucking the oxygen out of the plane. The global financial system got over-levered during the ‘02-‘08 boom. Now consumers, businesses, and governments are all seeking to increase savings and reduce debt. Officials need to figure out how to get the masks to deploy and keep us all breathing.
- Slow economic growth is making the controls mushy and unresponsive. Because delevering makes us less inclined to borrow, easy money isn’t as stimulative. That doesn’t mean they should change the policy and raise rates. It means more patience than usual is necessary.
- Communication is critical. When Captain Sullenberger faced his emergency, he made it clear what everyone needed to do and what they could expect. Our political leaders need to do the same.
Like a pilot facing unusual circumstances, those in charge need to focus, prioritize, and execute. Let’s hope they’re up for the job!
Douglas R. Tengdin, CFA
Chief Investment Officer
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