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Todd Harrison

June 9, 2010, 12:01 a.m. EDT · Recommend (2) · Post:

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Forging a path to economic recovery

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Political insiders retain their advantage

By Todd Harrison

NEW YORK (MarketWatch) -- There is a lot of information battling for our collective mindshare.

From global debt contagion and evolving war stories to double-dip concerns and violation of key technical levels, we awake each day in a fresh episode of the world's wildest reality show.

In the interest of compartmentalizing the crosscurrents and an eye towards assimilation, I offer five items -- some of which you know, others of which are new -- as food for thought as we digest this historic stretch for global markets.

Socioeconomics is the study of how the shifting economy or fluctuations in the stock market shape our perceptions and choices. Conversely, socionomics studies how social mood alters our economic reality and impacts financial markets, political preferences and other daily decisions.

Robert Prechter is a pioneer in the latter field and makes the case that human beings shape their surroundings rather than react to them. His groundbreaking work was the inspiration behind one of my favorite columns written this year. Read Minyanville's "The Short Sale of American Icons."

As we're apt to say, the greatest misperception in financial market history was that the Crash caused the Great Depression when in reality the roles were reversed. It's a subtle yet important distinction we would be wise to respect.

News last week that Hungary faced a "very grave situation" and Romania "rejected all bids" in a government bond auction roiled global financial markets. As Eastern European dominos align behind Greece, we must remember they're simply symptoms of a deep-rooted cumulative dynamic.

We've discussed the sovereign sequel to the first phase of our financial crisis and the five stages of grief that include denial, anger, bargaining, sadness and acceptance. Despite the proposed trillion-dollar "solution" and the unintended consequences thereof, the fatal flaw of financial regulation is that it's a political process while markets move in real-time. Read Minyanville's "A Five-Step Guide to Contagion."

'Walk into splintered sunlight, inch your way through dead dreams to another land. Maybe you're tired and broken; your tongue is twisted with words half spoken and thoughts unclear.'

Robert Hunter

Sometimes folks ask why I repeatedly draw the distinction between drugs that mask the symptoms and medicine that cures the disease. My response is that as long as policymakers continue to pump our free-market veins full of synthetic adrenaline, the hangover will be profound when the inevitable prognosis plays through.

You know the drill; we either continue upon our current course and hope debt-induced largess morphs into legitimate economic growth -- the plan that's been in place for over a decade -- or we swallow the bitter pill of asset class deflation and debt destruction that will ultimately allow for a sustainable economic recovery and outside-in globalization. Read Minyanville's "The Return of Phantom Deflation."

Voters say they're frustrated at the way politics works in this country, but incumbency and money still rule when it comes to elections, writes Rex Nutting.

12:44 a.m. Today12:44 a.m. June 9, 2010 | Comments: 8

I might not follow Todd's advice but I do like his personality in his articles. I also enjoyed his book which he gave to all of us for free. One of my heros. He is both a man of guts and feelings. And Hey, I'm a firsty!"

- goomee | 11:49 p.m. June 8, 2010

"Shanghai Composite jumps 2.4%, reversing loss, on reported leak of strong economic data http://on.mktw.net/anS8KS" 1:26 a.m. EDT, June 9, 2010 from MarketWatch

"Sharron Angle wins Nevada Republican Senate primary with tea party support http://on.mktw.net/cXVC6c" 11:50 p.m. EDT, June 8, 2010 from MarketWatch

"Former H-P chief Carly Fiorina wins California's Republican Senate primary http://on.mktw.net/9Dx794" 11:14 p.m. EDT, June 8, 2010 from MarketWatch

"Former eBay chief Meg Whitman wins California's Republican gubernatorial primary http://on.mktw.net/9Khv4m" 10:50 p.m. EDT, June 8, 2010 from MarketWatch

"Incumbent Sen. Blanche Lincoln wins Arkansas Democratic Party primary runoff http://on.mktw.net/c0z0ao" 10:04 p.m. EDT, June 8, 2010 from MarketWatch

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