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Displacement Activity, Minsky Moment, Abreaction   Richard Smith  naked capitalism

Displacement activity: behaviour that occurs typically when there is a conflict between motives and that has no relevance to either motive: e.g. head scratching

- The Free Dictionary

...when the Ponzi pyramid financial scheme collapses we have a Minsky moment.

- Paul Davison

Abreaction: an emotional release resulting from mentally reliving or bringing into consciousness, through the process of catharsis, a long-repressed, painful experience.

- The Free Dictionary

Richard Smith then discusses the activities last weekend at Jackson Hole, Wyoming, including Christine Lagarde's awkward truth telling, Trichet's reaction and then on to the reactions of The Serious People in Europe and the US:

This is all displacement: no one wants to recognize the losses and write off the debt, yet; not in Europe, (and not in the US, either, as we know well). There's still too much room to argue about whether it's liquidity or solvency, and about who should end up holding the bag, et cetera. Round and round it goes.

From a psychological point of view, it's as if everything before the Minsky moment was displacement activity; the Minsky moment itself coincides with the onset of abreaction. Here, via email, is an little instance of what it's like when you really run out of mental dodges; this is abreaction:

   I had a convo last week with a guy that worked at a structured products advisory shop and he said that in late 2008 (post-Lehman) he was hired to look at a Landesbank's books and when the representative from the bank asked him what this stuff was worth the advisory guy said he looked at the German and said "its all worthless, maybe a few pieces will perform in the long term but almost all of it is gone" and the German guy started crying and screaming at him...

Not the prettiest moment of enlightenment, but at least the Landesbanker got there in the end. Unfortunately the wait for an honest official confrontation of the public and private debt problems in the US and Europe is far from over.

In the USA both major parties hope that wait will last until after the next election, barring a major outbreak of event risk. What Serious Person in the USA wants to be the one to drop a turd into the recovery punch bowl? (Ron Paul isn't a Serious Person.) Besides, they would then be blamed for the ensuing calamity.

Many have to understand that the situation is only getting worse. The only ones benefiting from the current "extend and pretend" life support for the TBTFs are the current executives of those institutions. But, hey, they and their buddies made 40% of all political contributions last election cycle, and who can afford to do without 40% of their contributions? (We know they would all be in the same boat. But SHUUUH!) How much worse can it be if we just wait. Maybe the system will cure itself. (Cue Happy Days Are Here Again.)

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 29th, 2011 at 09:29:10 PM EST
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