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The Next Lobbying Effort

I've just about finished reading a VERY good book, recommended by Bill Bengen and Michael Kitces, entitled "This Time It's Different." The book includes a remarkable database of past market meltdowns and financial crises, going back to the 12th Century, and including sovereign debt repudiations, banking crises, episodes of hyperinflation and various bubbles bursting in pretty much any country you can think of. What is surprising is how similar these meltdowns are in their cause and effect, whether you're talking about Medieval China, Europe during the Napoleonic wars, the Asian Flu crisis or the global market meltdown we recently experienced. They start with massive accumulations of debt, inflated asset prices beyond reasonable valuations, and a lot of people convincing themselves that the world has changed in such fundamental ways that these warning signs can, for the first time, be safely ignored.

Of course, the book catalogues the follies of our own Federal Reserve, brokerage firms securitizing junk and consumers who were buying and flipping houses. It notes, almost in passing, that the federal budget deficits here and abroad are (and have been for decades) visible symptoms of self-delusion. And of course, the prescription is for debt (government and private) to be far more transparent than it is today (does anybody understand how the government manages its books?), and for policymakers to track our obligations and asset prices more carefully and responsibly than they ever have in the past.

How likely is this? I think most readers will wince at any prediction that our state and local governments will read this book and suddenly start making the hard choices, or that the policymakers at the Fed and elsewhere will actually start removing punchbowls in the early stages of our next wild party. But I've recently talked with a number of senior members of our profession who think that we, the citizens, have been enab33ling these careless behaviors in our government. Who wants to pay higher taxes to pay down the debt? Who wants to stop the partisan shouting long enough to reach across the aisles and make some tough choices? Who wants somebody to throw cold water on the next overheating bear market?

Actually, I think WE do–that is, we in the profession. In preliminary conversations with Tim Kochis, chairperson of Aspiriant (he and I are going to be speaking together at the NAPFA Practice Management and Investments Conference in September in San Diego), I began to realize how much the current lobbying effort on financial services regulation (fiduciary or not?) has cost the profession–specifically, a chance to add our voice to all the other public policy issues that affect finance, investments and our clients' way of life. Kochis believes that advisors and your clients could become the core of a more informed, more engaged, less partisan citizenry, promoting the tough choices, transparency and safeguards that might help prevent the next meltdown, and the one after that.

The next (post-regulatory reform) lobbying effort could become a grass-roots effort to mobilize your clients and constituents to speak about the virtues of self-sacrifice and the various ways we could be giving our children's generation less debt and a fiscally healthier society. It will come too late for us, who had to live through the Great Recession, the market meltdown, the scary freezing up of capitalism itself and a few bubbles and pops before that. I have an uneasy feeling that the worst could all happen again, and the adults in the community, the people who understand these issues better than anybody, are strangely not yet in the habit of speaking up.

And I have a feeling that the whole situation isn't going to get better, no matter how many books are written on the subject, until you find your voice, and begin to demand a broader lobbying effort than simply what affects our own narrow self-interests. THAT'S what got us into these messes in the first place.