The Sky Is Not Falling

This week's post comes from the Cabot Wealth Advisory


July 25, 2011

Salem, Massachusetts
By Timothy Lutts


I don’t know about you, but I’m sick and tired of all this debt ceiling talk … the distortion of facts, the posturing and the brinksmanship. But that’s politics and I expect no less from the elected representatives of our oh-so-diverse country.


What bothers me more than that is the way the media is eating it up—even fanning the flames—by constructing terrible scenarios of what might happen if the debt ceiling isn’t raised.

What’s lacking is a rational voice.


So today I’ll provide it, by looking at this from a perspective most people haven’t considered.


We start back in 1999, when the whole world was preparing for the countdown to the new millennium, or Y2K. The big fear then was that computers that had been programmed to treat years as two digits might think we were back in 1900 when the calendar rolled over. And if those computers belonged to banks, airlines, electric and water utilities, etc., the resulting chaos, dubbed the Y2K crisis, might bring civilization to a standstill … at least until someone rebooted.


John Hamre, United States Deputy Secretary of Defense said, “The Y2K problem is the electronic equivalent of the El Niño and there will be nasty surprises around the globe.”


But nothing happened. There were a lot of parties, and life went on.


On a smaller scale, consider two weekends ago.


Residents of Los Angeles were warned that the Sepulveda Pass Improvement Project, in which 10 miles of normally congested highway were shut down for 53 hours, would result in massive gridlock. The potential nightmare was dubbed Carmegeddon.


Posie Carpenter, chief administrative officer of The UCLA Medical Center, said, “We see this as being a disaster—only it's a planned disaster."


But nothing happened. In fact, the construction project was completed in just 36 hours, 17 hours sooner than expected.


The similarities in both cases should be obvious.


There was a well-publicized threat. There were widespread warnings about the threat. There was wide-scale adaptation to the threat.


And as a result, there was little or no pain.


In fact, thanks to the Y2K threat, a lot of computers were updated, which provided a nice shot in the arm to the tech sector.


And in LA two weekends ago, a lot of folks walked, rode bikes or used public transportation, and if some of them stick with that alternate mode of transportation, everyone will benefit.


Coming back to the debt ceiling crisis, which still lacks a catchy nickname, I think we’ve had ample and widespread warning, and I see little chance that the parties in power won’t come up with a compromise before the time bell rings. But I also see that each party will refuse to compromise for as long as it thinks it can gain political advantage from doing so … which could be right up to the wire.


And what will be the advantage to us from this “avoided disaster?”


Ideally, a smaller deficit, and the start of a true trend toward an improved national balance sheet. I look forward to it.


I can’t avoid sticking this in here.


Concern Yourself Least When Others Fear Most


The corollary, by the way, is this: Trouble comes from where it’s least expected.


So what should you worry about? Well, if you live in Southern California, and are happy to have avoided Carmeggedon, I suggest you think hard about an earthquake. I recently spoke with a seismic geologist who’d recently relocated from Los Angeles to Boston, and he told me he’s very happy to be on solid ground.


I can be reached at 615-777-4663 or via email at George.Margrave@MIGonline.com