By Francis Moran

“Life has a way of making the foreseeable that which never happens … and the unforeseeable that which your life becomes.”

I heard that line on Thursday evening last week when I went to see the new movie, Appaloosa, a terrific duster starring Ed Harris and Viggo Mortensen as two gunslingers hired to keep the peace in the town that gives the movie its title.

But the words could just as easily have been spoken by Stephen Poloz, senior vice-president of financing at Export Development Canada, who earlier the same day gave the keynote luncheon address at the Ottawa Venture and Technology Summit.

For a banker, Poloz had lots of funny lines as he delivered a logical explanation of how a bit of a live-for-today spending spree by American consumers in the wake of the September 11, 2001 terrorist attacks led inevitably to the near-collapse of the entire capitalist system.

If your world can be randomly eviscerated by unimaginable events well beyond your control, he argued, “what’s the point of having a credit card paid off?” This attitude led Americans to “spend every nickle they earned and every nickle they could borrow.”

The banks played along. “You can’t have a good speculative bubble without a good bank,” Poloz said, adding that the key thing the banks did was redefine what once was known as “uncreditworthy.” “Now we just call them sub-prime, and give them a loan.” Those loans were packaged up and sold off as well-rated and secure investments, adding further leverage to a situation that was already cranked way beyond sustainability.

And when housing prices stopped rising, the blow that American consumers feared would come from terrorists ended up being a self-inflicted wound. This last bit is my take, not Poloz’s.

What Poloz could not do, however, was give any counsel, and this is where he started sounding like novelist Robert B. Parker’s enigmatic retired soldier Everett Hitch. “The most important insight here is, we don’t know” what’s going to happen, Poloz said. “The models don’t explain what happened and they can’t explain what’s going to happen.”

Trouble is, he then started applying those broken models by way of reassuring his audience.

For example, he said the $700-billion package put together by the U.S. government would be enough to counter the $7 trillion he said speculators had blown into the markets because banks can take a dollar of fresh capital and lever $10 in new loans from it. Well, maybe under the old model they could.

Further, he said the meltdown of the U.S. economy would not have the same repercussions as those experienced by Latin American countries or Japan or others in decades past because, unlike then, the economy is not fragile, the regulatory regime is strong and the government has a good balance sheet. I’m not sure which American government he was referring to, but none of those three sound anything like they apply to the government that runs a big country just south of here.

For all of us who have been whipsawed by the markets over the past several weeks, the unforeseeable truly has been made into what our lives have become.

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