Saturday, January 19, 2008

Jazz and Economics: Marsalis, Greenspan and Bernanke

I've just come from a jazz concert given by Wynton Marsalis and the Jazz at Lincoln Center Orchestra. Although it was primarily an event designed to get kids interested in America's most original art form, Marsalis and his group of crack musicians blew the roof off of Chicago's Orchestra Hall. Their Ellington, Davis, Gershwin and Monk was flawless. It restored my hope in America's true culture: improvisation.

From Jamestown to our current troubles with the stock, housing and credit markets, there was no script. Sure, we were always panning for gold somewhere, but the real precious substances were what we created along the way. We made it up as we went along. For the most part, except for the Civil War, the genocide against Native Americans and and few really stupid little overseas conflicts, it's been a worthy project. It's been jazz all the way.

What Marsalis was teaching wasn't exclusively about music nor was it about doing your own thing with an instrument. His main points were understanding the foundation of rhythm, building on it and making it into something new. Four beats to a bar, moving around the accents -- syncopation. Then one plays with the melody. Is it too fast or two slow? Is the drum too loud or the bass too soft? Are the solos too long? What happens if you throw in some really complicated Thelonius Monk-type harmonies? Equilibrium is the key. Too much of one thing can spoil the final product.

Marsalis and his crack musicians nailed everything. Maybe the kids didn't appreciate what they were hearing, but the adults did.

In our economy, the basic rhythm is liquidity. If I want to buy a house -- and I'm a good credit risk with steady income -- I should be able to get a mortgage. If somebody needs to sell something -- a car, a security, a mortgage -- they should be able to find a buyer. That's what keeps everything going in the harmonic world of money. Yet lately things haven't been meshing. There are more sellers than buyers in the home market. Buyers can't get the money they need to relieve the inventory of 4.5 million homes. The great energy of the world's largest economy is dammed up. If the pressure isn't relieved, there will be a panic where everyone is selling and almost no one is buying.

In jazz, the tension builds and is relieved through chords and solos and held together by the steady beat of a decent drummer and bassist. The American economic rhythm section is the Federal Reserve, adjusting interest rates and money supply to keep the tempo of the economy at a sustainable pace. Too much money means inflation; not enough, a recession.

Where are we now? The drummer has slowed down. He needs to pick it up a bit. The whole band needs to listen to one another and start playing together. They all need to agree on a common tempo and stay with it.

Alan Greenspan, as many know, was an aspiring swing musician before the pull of economics changed his life direction. While I certainly don't think he was the best Federal Reserve chairman in history -- his inattention to a rushing rhythm section triggered two bubbles -- he understood how to measure the tempo of the economy.

Now it's time for Ben Bernanke to start talking with Greenspan and the other musicians who understand economics and markets. He's the band leader now. It also wouldn't hurt if he went and saw Wynton Marsalis. He might learn a thing or two about playing in tune and following a beat.

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