In his Life of Pericles, the Roman author Plutarch wrote that, having won the people away from his adversary Cimon by spending their own money on the entertainments and spectacles he laid on for their diversion, his eponymous hero further consolidated his hold on power by daring to spend his allies’ tribute (read: tax payments) on a lavish programme of public works rather than holding them, as was supposed to be the case, in reserve for use in time of war.
As Plutarch puts it, as well as building up a powerful fleet to patrol the sea lanes of his world – with the aim not just of cowing friends and foe alike, but also of securing the support of those who derived their living from military service – Pericles turned his attention to addressing the effects of ‘secular stagnation’ plaguing those who remained in Athens:
As the European economy finds itself yet again adrift in the windless doldrums of slow to no growth, the only quack remedy being discussed is still the same old spend-now-worry-later Keynesianism. Despairingly universal is the refusal even to contemplate the fact that what is holding the economy back is not a lack of spending, but rather the frustration of the will and the pre-emption of the means to increase profitably saleable production. That the best thing for the state to do is less, not more, of whatever it has been doing and to allow the people the freedom to do more of what they chose to do of their own volition is far too radical a solution to embrace for a leadership which has already forgotten that the same academics telling them to ‘keep calm and carry on’ with a failing set of curatives are the ones who all too briefly had the grace to question their core methodology in the aftermath of a Crash which, almost to a man, they failed to understand when it was in full swing, much less to predict in advance of the break.
Back in the halcyon days of summer, it seemed nothing could go wrong.
Commodities were still things it was not utterly disreputable to own. Base metals had shaken off a springtime swoon to hit 18 month highs. Though still suffering from that enervating, post-bubble flatness, precious metals had just enjoyed a neat little 10% rally. Energy was threatening to print new 2 ½ year highs as WTI sold for more than $107 at the front and $86 at the back of the curve. Nor were people much interested in paying for downside protection: across the complex, options premia were as low as ever they had been in recent years.
Somewhat lost in the excitement over the ongoing plunge in the oil price, the tepid endorsement given at the low turn-out election to Shinzo Abe’s sacrifice of the pensioner to the property speculator, and the susurration of rumours that Draghi will soon admit that he has suffered the heaviest defeat suffered by a Roman at the hands of his northern tormentors since Varus lost three whole legions in the Teutoburger Wald, before scuttling back to take up his dream job in the Quirinale, the Chinese have been holding their agenda-setting Central Economic Work Conference.
“In the sweat of thy face shalt thou eat bread, till thou return unto the ground; for out of it wast thou taken: for dust thou art, and unto dust shalt thou return.”
Or so a rather angry Jehovah was said to have thundered at Adam when he cast him out of the Garden for committing the cardinal sin of developing self-awareness. Ever since, the story goes, mortal man’s lot has been a sorry one of incessant toil, the inevitability of his demise and – for his beloved partner – the anguish and deadly peril of childbirth.
So, if we could persuade a forgiving God finally to relent and to repeal our sentence, giving us safe passage back out of the Land of Nod to the primaeval, care-free paradise of our creation, do you think His mercy would be well-received by those who presume to rule over us here and now in the earthly realm?
One of the overarching characteristics of asset markets is that its participants are prone to harbour the eternal Doublethink whereby the consensus usually revolves around a sempiternal bullishness with regard to equity prices and an equally unshakable millenarian gloom regarding the wider prospects for the human race.
With regard to the latter, it should be recalled that, only a few short years ago, the media were overly solicitous of the morbid declamations of both Hubbert’s Peak Malthusians and their lesser brethren who saw naught in prospect but depleted mineral seams and planetary-scale dustbowls. All of this ilk were much given to tortured Old Testament visions of an imminent, resource-exhausted Dystopia were we not instantly to repent of our unrighteousness and sin and to follow their always anti-economic and frequently anti-scientific prescriptions for society instead.
For all those still clinging to the hope that today’s extraordinary level of equity valuation will soon reverse and what we fondly remember as ‘normality’ will again break out (and we confess that we are often to be found among their camp), we and they should never lose sight of the fact that this exaggeration is a direct result of the central banks’ deliberate move to destroy the market for time discount and so to provide the rentier class with a little assisted suicide (only fair since it was obviously all the savers’ fault that the previous period of central bank laxity had induced far too many people to borrow too much bank credit the last time around with predictably disastrous results). Continue reading
It is rare these days to come across an investment manager or a strategist who will not proudly volunteer that he is either ‘Long the Nikkei, short the Yen,’ or is telling his clients to position themselves that way.
With all due caveats about crowded trades and the like, we cannot find the second part of this at all objectionable, having long been promoting the view that the USD would do what it has repeatedly done (in real effective rate terms) ever since the break up of the Gold Pool in 1968 signalled the imminent end of the Bretton Woods system – namely, decline then base out over the course of a decade to a point within +/- 2 1/2% of the same base level (95.5 on the BIS index), then reverse and rally for the next 6 1/2 years. Continue reading
In a widely reported speech given in Kochi, BOJ board member Takehiro Sato gave voice to some of the dissent which has riven policy makers – and, we suspect, much of Japanese society – over the issue of whether the government’s latest resort to the Patent Inflationary Panacea (henceforth, the ‘PIP’) is likely to have the desired effect.
Expressing doubts over whether a hard ‘target’ for the attainment of a steady rate of price escalation of 2% a year – that latter-day shibboleth of collectivist Macromancy – Sato made the very reasonable, if little shared, individualist observation that ‘prices reflect the temperature of the economy, not a variable [sic] that can be directly controlled by a central bank.’