A tobacco moment, a fiscal cliff, and a Grexit

It's great to have such memorable shorthand phrases for the complex financial problems we're going through; but a few years from now, will we even remember what they meant?

Ready for a little vocabulary quiz? No? You say you'd rather be at the beach?

This won't take long. Just try to explain: What do the three phrases in the headline over this column have in common?

All are examples of shorthand for hugely complex current economic and financial problems we're facing.

When talking heads talk about the Libor scandal as "a tobacco moment," they're piling a complex allusion onto an already complex financial scandal. The nub of it is allegations that over a period of years, as many as 20 major banks colluded to rig the London Interbank Offered Rate (Libor), used to set payments on about $800 trillion worth of financial instruments, from ordinary mortgages to complex derivatives.

The gravity of the scandal may not have registered with mainstream America. Bloggers at Media Matter for America write, "Instead of covering one of the largest banking scandals in history, American television news outlets have focused on the divorce of Tom Cruise and Katie Holmes, shark sightings, and a chimpanzee attack."

The Economist quotes a chief executive of a multinational bank, "This is the banking industry's tobacco moment," and explains that the reference is to "the lawsuits and settlements that cost America's tobacco industry more than $200 billion in 1998."

Economist Simon Johnson, on the Diane Rehm Show July 17, referred to the scandal as "a tobacco moment," but added, "I think that [the banking industry] is a more powerful industry than tobacco ever was. They give more money in terms of political contributions.... But when you have a groundswell of opinion and when you have the states involved [losing money from their pension funds] and when you can pursue criminal charges, that changes the dynamic, and I think that changes the political logic."

This may, or may not, lead to a robust regulatory or prosecutorial response to the scandal. For now, the smoke of the tobacco moment is just sort of hanging in the air.

The "fiscal cliff" is Federal Reserve Chairman Ben Bernanke's term for "the many major fiscal events" that could occur at the new year, The Fiscal Times explains: "The events include the expiration of the Bush era tax cuts, the payroll tax cut and other important tax-relief provisions. They also include the first installment of the $1.2 trillion across-the-board cuts of domestic and defense programs required under last summer's bipartisan deficit reduction agreement." There's also the risk of a political standoff over raising the debt ceiling again.

I commend Mr. Bernanke for avoiding the cliché "perfect storm." It may be, however, that Nouriel Roubini ("Dr. Doom"), the New York University economist who predicted the bursting of the housing bubble and the global recession of 2008 has "perfect storm" under copyright. Dr. Roubini is "standing by his prediction for a global 'perfect storm' next year as economies the world over slow down or shudder to a complete halt, geopolitical risk grows and the euro zone's debt crisis accelerates," according to Reuters.

Which brings us to the Grexit – the (possible) Greek exit from the eurozone. The good news about the fiscal cliff is that it has distracted Americans, at least, from worrying about the Grexit.

It's great to have such memorable shorthand phrases; but a few years from now, will we even remember what they meant?

Enjoy your time at the beach. But do keep an eye peeled for attack chimps.

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