Some times it takes a foreigner like myself to give some insights in another countries' culture, running the risk of being misinterpreted. Call it professional or cultural blindness and someone from the outside can be of help.
One of the characteristics of American society and business, that I admire and that makes America so agile and responsive to market demands, is what I call the Write Off Society.
Contrary to most other countries, especially Europe, Americans are able to cut their losses rapidly, write off bad decisions and investments from their balance sheets, and look forward with little remorse.
This has enormous consequences in the pricing of American products, and makes them competitive. Consumers are not paying for past mistakes, GM and Ford are the glaring exceptions.
It is this positive attitude that it is now playing havoc with the financial markets. Write off’s have become institutionalized, not discretionary, they have become contractual and enforceable, such as these ludicrous market to market rules, that is feeding this crisis on itself.
Write off’s used to be discretionary, but market to market rules are actually compulsory write offs, which makes no sense in a run to the banks and financial institutions.
Margin calls are another aspect of the Write Off society, though no one would consider a margin call as a write off, but a temporary write off it is.
Why not tell lenders to sweat it out during a market slump, why should lenders admit to a write off and pay back ahead of time a contractual loan that is due only 5 years form now.
Contrary to the Keynesians and nearly everyone else wanting more regulation and more government intervention, my feeling is that the write off society is what has gone overboard, and more discretionary power should be given to individuals, not government, as to what is a write off and what is a bear market.