Strange Days

Strange days have found us
Strange days have tracked us down
They’re going to destroy
Our casual joys

– The Doors

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Every day brings something new. The unthinkable becomes normal. The impossible becomes mandatory. We are living in truly strange times…

Do you remember when things were really humming? It seems like only yesterday that the market was the answer to everything, the magical mechanism that transmitted perfect information through its myriad price signals. Now, market fundamentalists have lost their religion and are contemplating state intervention on a scale that Stalin or Mao might have envied. No discussion of whether or not, but rather a debate about how soon and how far…

Meanwhile, socialists are breaking cover with a hesitancy that defies imagining. Rebecca Long-Bailey has suggested that the current circumstances make the case for Universal Basic Income, something which, in any case, Rishi Sunak appears to be groping his way towards. But then comes her killer move, she advocates UBI only ‘for the duration of the coronavirus pandemic’. How strange is that? An avowed socialist, heiress to Corbyn’s mantle, the ‘Wicked Witch of the Left’ – answer to the prayers of the Tory press, and she wants a genuinely socialist, income-equalising measure on a merely temporary basis. Faced with an open goal, she fails to seal the win and grab the trophy. Remarkable…

and… the drugs don’t work any more. Interest rates are cut and cut again, announcements are ignored by the markets, stimulus packages don’t stimulate. The problem is that all the various knobs and dials (be they monetarist, Keynesian, NMT, neo – Keynesian, whatever) that economists argue over, all the ‘controls’ they recommend politicians to tweak and yank, all of them operate on a single important premise: that the economy is somehow working, not perfectly, not properly, but to some extent working. When that premise no longer holds, the controls no longer work. The dashboard is dead…

…so how dead is the dashboard? Here’s the problem: we have grown accustomed to (that is, we are structurally committed to, and cannot, in the short to medium term, extricate ourselves from) a joined-up, globalised world of interconnected supply chains criss-crossing national borders in a spider’s web of interdependency. If a factory closes in Thailand, components from it will not come to Germany; if Germany can’t get those components, then nobody can get the finished goods that Germany exports – and the chilling thing is that this example is a gigantically simplified cartoon of the real issue. The controls on the dashboard relate to events in single economies, sometimes in particular rarefied cross-border financial ecosystems but the problems are not confined to single economies, nor to single financial ecosystems, so don’t be surprised if the drugs don’t work any more.

In these Strange Days we need politicians and economists who not only see the problem, but who are prepared to solve it. They need to have the intellect, vision and resolve to work across borders, eschewing partisan and ideological differences. Above all, we need innovation, new ideas implemented internationally. Without that we are hurtling forwards with nothing but a rear-view mirror for guidance, and it is only a matter of time before we smash into the wall.

2 thoughts on “Strange Days

Stimulating read. Congratulations.

In 2008 as the GFC was solved by pouring gigatons of money but left many governance issue in the air (the financial architecture problem, the moral hazard, the EU institutional imperium over members countries, the political and social price. As in genocide, financial crisis, wars we hardly learn and tend to forget.

2020 is another defining moment as you raised in your article. Among the many learning:
– is the WHO sufficiently independent to be a sanitary whistle blower due to the international politics mingling with warnings decisions
– the ESG trend to integrate ethics in business could also include resilience together with sustainability. The former is a question of survival the second relate to the medium term harmony. Resilience means integrate catastrophy analysis , maybe life insurance company does.
-Financial leverage is the ad eternam problem of financial stability and central banks should broaden their surveillance over it.
-governance based on nationalism is sub optimal , the C 19 led to blindness to model case reaction (such as Singapore).
-At the firm level, there is an assumption of continuity that was challenged by the Great Viral Recession we are entering into. economic sudden stop should not be part of the risk scenario.
– the social networks has many advantages of aggregating, sharing and adaptation to new information, this a powerful adaptative energy to leverage.

And many more as this is a discovery that will lead to new knowledge and more responsable approach.

Very best
Didier

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