The Post-Binge World

By THOMAS L. FRIEDMAN
NYT

My friend Rob Watson, the head of EcoTech International, has a saying about Mother Nature that goes like this: “Mother Nature is just chemistry, biology and physics. That’s all she is.” And because of that, says Rob, you cannot spin Mother Nature. You cannot bribe Mother Nature. You cannot sweet talk her, and you cannot ignore her. She’s going to do with the climate whatever chemistry, biology and physics dictate. And Mother Nature always bats last, and she always bats a thousand.

There is a parallel with markets. At their core, markets are propelled by fear and greed. They’re just the balance at any given moment of those two impulses. Over the long run, you cannot spin the market. You cannot sweet talk it into going up or beg it not to go down. It’s going to do whatever it’s going to do — whichever way greed and fear tug it. And the market always bats last and it always bats a thousand.

What am I saying? We are where we are today because we went on a credit binge and we’re now paying the price. Because it was the biggest credit binge the world has ever been on, a lot of wealth is going to be wiped out. Now what you’re witnessing is the market re-evaluating and re-pricing every asset in the world, without mercy, telling each stock, bond and bank what its value is in a post-credit binge world.

So why, despite the Congressional bailout, haven’t banks started lending again?

(Continued here.)