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Language Arts: Rebalancing

The whole world is being rebalanced it seems - whatever that means.

President Obama recently called for a rebalancing of the world economy. Cook County officials instituted a rebalancing of its employees to help resolve budgetary problems. Rebalancing has even found its way into an advertising campaign - Merrill Lynch's Wealth Management Group promises rebalancing in its "help2 Achieve" commercials.

In light of the onslaught of rebalancing efforts taking place, we thought we would provide a little help of our own and attempt to explain what rebalancing is and why so many appear so keen on it.

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For the most part, rebalancing is an economic/financial term.

And while it has been picked up by other sectors, e.g., healthcare/medical, employment, spirituality and automotive maintenance, nine times out of 10, the word rebalancing refers to the constructive, often beneficial, task of reviewing financials to discern where and how things can be moved around or shifted to capitalize upon current economic conditions.

Essentially the ultimate goal of rebalancing is for the financial portfolio to be tweaked and reshaped (recomposed) to do away with the deadweight and bring more lucrative products into the mix. The overriding aim is to recapitulate what works and what doesn't and find ways to pare down the profit-draining holdings and beef up those with the potential to bring in more earnings.

Or, as CNN Money puts it: "An easy and effective way of maintaining the right balance between risk and reward in your portfolio."

The rebalancing process, then, is akin to world leaders looking to divvy up the weight of the global economy by unloading some of its crippling debt upon unsuspecting subjects.

Financially speaking, the definition of rebalancing is: "The act of changing the percentages of different types of securities in a portfolio. If one's investment goals change (or if the portfolio is not meeting them satisfactorily), one rebalances the portfolio in order to achieve them."

In layman terminology, Answers defines rebalancing as: "The process of realigning the weightings of one's portfolio of assets. Like a tune-up for your car, mutual fund rebalancing should minimize trouble down the road."

It was during his recent trip to Asia that Obama made the firm statement that the world economy needed rebalancing. Yet, in response to this candid declaration of imbalance, what perhaps many were privately (and publicly) questioning was: "At what time in history was the world economy ever actually balanced?"

Rather than saying our world economy was totally f%$*&! up, (can't call it a failure for that would imply that nothing is salvageable and everything need be scrapped), the powers-to-be declared the best way to resolve our disproportionately arranged economy was to get out and "shake things up" and "move things around."

So Treasury Secretary Timothy Geithner said in November that "Weaning the global economy off its reliance on U.S. consumers will help rebalance growth and support attempts to bring down unemployment."

Yet, if the global economy finds a way to wean itself off its reliance upon U.S. consumers, who then will be left to support its rebuilding mission? Does a sugar daddy for the global economy patiently wait in the wings?

Thus, when considering the option of rebalancing (something you do all the time, right?) the first two things you should ask yourself are:

1. Is there something here that seems to be off-balance or off-kilter?

2. If the answer is YES then your second question should be when (if ever) it was last perfectly balanced.

The word rebalance on account of its prefix "re" assumes that whatever it is you are talking about was balanced at one time and now requires a re-do. Take, for example, several other instances in which the prefix "re" is used in conjunction with verbs, e.g., revisit, repave, remove, redirect and recant; they all imply a second going over of sorts.

While there may not necessarily be an original balanced state to revert back to, hopefully there is the possibility of improving upon the current condition without inflicting harm upon anyone/anything in the process.

Not to say that rebalancing doesn't have its merits. I merely want to point out - as the Global Council on Foreign Relations did following the G20 Summit in Pittsburgh - that in an attempt to create stability, it is important that holdings don't simply get shuffled here and there, because this could create its own maelstrom of problems down the road.

As the global council said in its report, "When the leaders of the Group of 20 (G20) major economies met in Pittsburgh at the end of September 2009, the topic of 'rebalancing' the world economy was high on the agenda. The final communique's first substantive commitment was 'to work together as we manage the transition to a more balanced pattern of global growth' . . . rebalancing requires a fundamental reorientation of some of the world's major economies, a reorientation that will lead to major economic, social, and political tensions."

In spite of its much talked-about potential to turn around financial distress, rebalancing also carries with it the possibility of upsetting the current status quo for the worse.

So alls I am saying is that with rebalancing being billed as this year's top priority, it may be a good idea to revisit last year's prized word: transparency. When teamed with rebalancing, it helps offer an accountable way of ensuring that things getting moved around are not simply getting swept under the rug or conveniently misplaced

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Previously in Language Arts:
* Pushback.

* Locavore.

* Going Rogue.

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Comments welcome.



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Posted on December 16, 2009


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