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No Real Control, But We Could Get a Clue

by Jay Bookman

Company was coming, so earlier that day he had broken out the leaf blower and herded every last scrap of leaf and litter into a corner for bagging. When he was done, the front yard, porch and sidewalks looked pristine.

But two hours later, as he walked out the front door and down the steps, he could again hear the steady crunch of fallen leaves beneath his shoes. Shedding trees and an autumn breeze had quickly undone all that work, and his yard once again looked no different from any other leaf-strewn property in the neighborhood.

He had to smile. So it goes. Mankind always tries to impose a little order on the world; if we make things look tidy and organized, we can fool ourselves into thinking we have control over things.

Then life, like an autumn breeze, steps in to rearrange things and remind us that our sense of control is an illusion, that we are all just leaves in the wind, blown by forces far more powerful than ourselves.

These days, the news is full of more reminders than we need.

The stock market is "self-correcting" with a frightening ferocity, housing prices are collapsing and foreclosures are soaring, and the American dollar - once the proud symbol of a dominant economy - has lost the confidence of international currency traders and is cheaper than the Canadian dollar.

With all that going on, people feel vulnerable, and for good reason. The market is working its mysterious ways, balancing supply against demand, profit against loss, risk against reward in ways so complex as to defy understanding.

And most of us have little recourse but to accept its verdicts as just, even though to the amateur observer, its wild swings can look strangely irrational.

Judging from their comments, it looks the same to the so-called experts as well. Two years ago, after the price of oil topped $50 a barrel, top analysts such as Daniel Yergin of Cambridge Energy Research Associates were predicting that oil prices had peaked and would begin to fall as new supplies came on line. By early 2007, a CERA study predicted that increasingly supply would more than offset demand, dropping oil prices to $40 a barrel or lower.

Oil closed Friday at more than $95 a barrel.

There's no question that the market does work, but its justice can be a crude justice, sweeping all into its maw and making no distinctions between hapless bystander and deserving fool. Its judgments can seem exceedingly capricious.

Take the subprime mortgage crisis, which itself has had striking global ramifications. First-time homeowners who maybe should have known better than to accept such loans will feel the market's discipline pretty hard. They'll lose their homes, their down payments, their savings and credit ratings.

But the market says that Wall Street financial experts with Harvard degrees - people who were trained and paid very well to spot such problems - will pay a far lesser price. Merrill Lynch, for example, had to write off $8.4 billion in subprime loans last quarter, forcing the resignation of CEO Stanley O'Neal. For his mistakes, the poor man was shoved out the door with a $161 million severance package. His credit rating is probably pretty good, too.

If we're honest, though, we have to admit that these sudden swings of fate aren't entirely capricious. It was no secret to anyone paying attention that the housing market had worked itself into a dangerous froth.

We have known for a long time that Americans couldn't consume $500 billion more goods and services than our nation produced each year without driving the dollar down someday.

And we knew in the back of our minds that our reluctance to address our energy problems would someday exact a heavy price.

"Our excessive dependence on foreign oil is a clear and present danger to our nation's security," Jimmy Carter warned us back in 1980.

Now fall has come - harvest time - when we reap what we have sown.

Jay Bookman is the deputy editorial page editor of the AJC. His column appears Mondays and Thursdays.

© 2007 The Atlanta Journal-Constitution

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