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Beware excessive certainty about Wall Street crisis

We all have our ways of escaping when the world is too much with us. Some find that “reality” TV serves. Others have football. I’ve been rereading the seafaring novels of Patrick O’Brian.

In the one I’m on now, there is an enduring image that has stuck with me this week: a frail wooden ship, its sails reefed to the minimum, riding an enormous swell in the chilly latitudes far south of the Cape of Good Hope. Each wave is higher than the masts, and the crew scrambles from moment to moment to keep from being overwhelmed by wind and water.

Following the crisis on Wall Street has been like that, except that the ship’s crew could do something. Watching the unbelievably high waves of financial news breaking, I felt more like a passenger who doesn’t know port from starboard. I suspect I’m not alone in this.

In fact, I know I’m not. What I’ve read in recent days has caused me to beware anyone who sounds too glibly sure about how we got where we are, and what we should do next.

Early in the week, I was glib myself, on my blog. I complained mightily that my worst fears (first voiced in January) were being realized, that this would end up being an election about the economy. My whole career, I had considered a newspaper front page that led with economic news a dead giveaway that nothing interesting was happening in the world. But by the end of the week, the sheer scale of what was happening shut me up on that score.

The Wall Street Journal played the turmoil on its turf across six columns at the top of the front page, five days in a row. Rupert Murdoch or no Rupert Murdoch, that just doesn’t happen. And a smaller headline on one of those same pages proclaimed the “Worst Crisis Since ’30s, With No End Yet in Sight.” A terrorist attack on the U.S. embassy in Yemen got pushed to an inside page, and not even I scoffed at the editors’ judgment.

The Washington Post’s Robert Samuelson, usually a mortal enemy of hyperbole, wrote that “Wall Street as we know it is kaput.” I did not doubt him.

The fall of giants of high finance, from Lehman Brothers to Merrill Lynch to AIG, seemed less significant than the fundamental, systemic changes that happened in reaction — reinforcing the metaphor of a deep ocean swell as opposed to mere whitecaps. The Federal Reserve teamed up with other nations’ central banks to “improve the liquidity conditions in global financial markets.” The U.S. Treasury secretary and chief of the Fed huddled repeatedly with other major players — in not only New York, but London, other foreign capitals and right up the road in Charlotte — to reshape the U.S. financial system.

The phrase “on the fly” would appear in report after report, giving the impression of erstwhile Masters of the Universe scrambling like common sailors between the waves washing over the deck, desperately trying different combinations of sail and rudder.

Amid all this, some pundits would air their erudition regarding such affairs, but what certainty they were able to muster seemed to arise from their own political prejudices. On the facing page you see that Paul Krugman notes with satisfaction that “much of Washington appears to have decided that government isn’t the problem, it’s the solution.” Mr. Krugman is a professor of economics at Princeton. But other smart people wrote the opposite. George Will grumbled about the rapid increase of “government entanglement with our less-and-less-private enterprise system,” and a member of The Journal’s editorial board flatly said, “Government largely created this mess.”

Ignorant as I am, I strongly suspect that the best way through this storm will thoroughly please neither supply-siders nor the acolytes of John Maynard Keynes.

So it is that, perhaps paradoxically, I was reassured to see just how uncertain the two candidates for president were in the face of this unexpected challenge.

They, too, started the week glib. As late as Tuesday, John McCain was blithely expressing his opposition to the AIG buyout, and Barack Obama was responding with the usual comfort that Democrats feel with pocketbook issues, pontificating that “John McCain cannot be trusted to re-establish proper oversight of our financial markets for one simple reason: He has shown time and again that he does not believe in it.”

But the next day, Sen. McCain more humbly acquiesced to the necessity of the bailout, saying “there are literally millions of people whose retirement, whose investment, whose insurance were at risk here.” On Friday, he tried to put his views in a coherent context with a speech to a Chamber of Commerce in Wisconsin, while Sen. Obama said his own more extended proposals would be forthcoming once he had met with his advisers later that day.

In this kind of environment, with each news cycle bearing down on us like a wave that seemingly could, in Bob Dylan’s words, drown the whole world, I find greater comfort in such humble confusion than in the positive tones of those who are too sure of their analyses.

As The New York Times noted, “The actions of both men captured how they were being forced to make policy proposals and pronouncements on the fly, from one campaign rally to another, as each day’s developments in the financial markets and in Washington were overtaken by new ones the following day.” The campaign had become an “audition for who could best handle a national economic emergency.”

At some point we’re going to need some FDR-like self-assurance mixed with pragmatic solutions. And in this election that is suddenly about the economy, it’s unclear which candidate will pass that part of the audition.

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