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Be Prepared if the Recovery Fails, Part II

Thumbnail image for Thumbnail image for angry bear.jpgIn the first part of our two part interview with Financial Armageddon’s Michael Panzner, we dealt with the ugly part, but what about the bright side? I guess one wouldn’t expect a doom and gloomer to have a silver lining tucked into his rain cloud but trust me, it’s there and it’s not nearly as bad as it seems.
In case you missed part 1, it may be found here.
Of all of the things we got out of speaking with Panzner, two key points resonated above all the fear and panic and fright: A) though it’s bad and will likely be bad for quite some time, what results once we flush out the garbage will leave us better off than we were before the shit hit the fan and B) it’s actually really not as bad as it appears.
Continued, after the jump

Panzner insists that while China may have the upper hand at the moment, they are also of the pack mentality; meaning that they may not be entirely equipped to cut and run like investors in the West and instead loyal to an ideal that dictates following the pack is sometimes the safest move one can make. What the hell does that mean?
A little bit of Panzner wisdom:

China and other emerging economies have for years used various methods to “protect” domestic industries, including managing foreign exchange rates and creating lots of hoops for outsiders to jump through to do business in domestic markets. So it is probably fair to say that the notion of widespread protectionism is not something new. But with economic circumstances becoming decidedly more hostile, it shouldn’t be surprising to see more and more countries adopting strategies that give local concerns an advantage over outside firms. Not all of them will look like traditional trade barriers, however.

Protectionism is a threat but not all that unlikely of a scenario. Some – Panzner among them – argue that bailouts could be translated as protectionism, and it is no small wonder that sovereign nations would adopt such a strategy in times of economic turmoil. But China doesn’t appear to be prepared to pull the trigger on the economic WMDs, at least not now.
“In the short run, I don’t see the Chinese resorting to the ‘nuclear option,’ where they decide that the strategic advantages of dumping the dollar outweigh the damage they might do to themselves,” he says, reminding us that screwing the US means screwing themselves, something Asian investors tend to find distasteful, to say the least.
As we pointed out in the first part of this Panzner brain-picking, the best strategy to adopt is one of preparedness in the face of uncertainty. This means you, little accountants.
“If the events of the past few years have not convinced people to ask plenty of questions and challenge any sort of assumptions, I don’t know what will,” he tells us. “I would suggest that everybody — including accountants and CFOs — take the Boy Scout motto to heart in their personal and professional lives. That is, hope for the best, expect the worst, and be prepared for whatever happens.”
The “expect the worst” isn’t pretty, at least from Panzner’s qualified perspective, and whether or not you agree with his assessment (as yours truly does), it can’t hurt to be reasonable about the long hard slog called “recovery” ahead of us. “In the end, wishful thinking won’t make it go away, but having a firm grip on reality might make the experience a lot less painful. Ultimately, there is a light at the end of the tunnel, but I personally think that point could be up to a decade away.”
His is but one opinion of many and as always, it is all in perspective. Regardless of what you believe lies ahead, it can’t hurt to consider the many possibilities that we find in our particular fork in the road. With unemployment climbing and the fate of the dollar in the hands of financial crack addicts at the press, it makes sense that he and others would believe in a future that is only slightly less rosy than the one painted by the powers that be in hopes that we’ll hit the mall and kick consumer spending in the ass once again.
The days of big screen TVs and SUVs are gone but your future remains. It’s all in how you handle that.
We are not here because our central bank did or didn’t do anything, Panzner reminds us, we are here because there has been a crisis of faith in our money, in markets to work their regulatory magic naturally, and in the traditional weapons of monetary policy and politics to scare events into compliance along the way. Does that mean it’s all hopeless and we should just curl up in a ball and cry?
Well no. Didn’t you read the damn interview?
Thanks go out to MP for letting us pick his brain, and we’d love to revisit again 6 months down the road if everything hasn’t fallen apart by then. Just a reminder, you can find him blogging over at Financial Armageddon and When Giants Fall, as well as Huffington Post, Seeking Alpha, and pretty much all over the Internet. Love ya, MP, even though you make me cry sometimes!