The top two stories in high finance today surely leave most people scratching their heads.
The head of the International Monetary Fund, a globe-trotting deal-maker who worked daily with unimaginable amounts of money, briefly turned into a fugitive on Saturday. He was in such a rush to leave his hotel and the country that he left his phone and other possessions behind. Criminal charges aside, the accounts of his actions that day fail to reflect the attitude of care and caution one would expect from a person entrusted with the world’s money.
Today, the United States, the richest country in the history of the world at the richest point in its history, is effectively putting itself into bankruptcy. Congress has balked at authorizing the borrowing needed to pay for the expenditures it has already ordered. By the end of the work day today (some observers say it has happened already), the national government will have run out of money and will be unable to borrow more. Uncle Sam is now the trillionaire on the block who won’t pay for his own pizza.
We would wish that with the largest financial obligations we would find the most rational decision-making, but that does not appear to be the case. There is something about institutions that deal with hundreds of billions of dollars that makes people take leave of their sense of proportion. Without proportion it is impossible to make rational decisions — “proportion” and “ratio” are synonyms, after all. This disconnect between high finance and rationality has gotten markedly worse in the last 15 years as the largest institutions have grown larger, so this may reflect an operative limitation of human management abilities. There may be other solutions, but the only answer I can suggest at this point is that we find ways to not place so much reliance on the decisions of the largest institutions.