Friday 27 May 2022
If you examine carefully (although it is an extremely simple exercise) Goodhart’s Law, you will find why Jay Powell MUST BE REMOVED from heading the Fed.
Goodhart’s Law, in a nutshell, says that once a central bank instrument applied to a target BECOMES KNOWN, it immediately loses its effectiveness.
It’s a simple thing to understand. Goodhart just proved empirically that it is applicable in reality.
In a competitive regime, once market agents know how a central bank operates…they take measures aimed at avoiding the adverse effects that follow from that operation. With the inevitable outcome that the effectiveness of the central bank operations is dissipated and lost.
In other words, Goodhart is saying that, whilst it is DESIRABLE that central banks keep markets informed, there are times when you have TO SHOCK AND AWE markets into a retreat by barring the escape route! Effectively, by punishing markets for challenging the central bank!
Goodhart was aiming at “moral hazard”: if I lend you a dollar, you have a problem. If I lend one million, I have a problem.
Similarly with central banks: if I telegraph every one of my moves in advance, it is obvious you will take preventive steps to elude or defeat my purpose.
And that is precisely what the Fed is doing with asset markets! By being “data driven”, the Fed keeps giving market agents ample room to jump ahead and give it very little room to change course ON PAIN OF CAUSING MARKET PANIC!!!!
Essentially, the Fed is allowing market agents to hold it to ransom by threatening “tantrums”!
So beholden is the Fed to markets, that it has lost all authority and now markets openly and aggressively DEFY its every move well ahead of time!!!
I discuss central banking and financial instability in a regime of rising rates and consequent disinflation/recession in this fairly technical paper:
Wednesday 25 May 2022
Ross Douthat in NYT:
“…the American republic does appear sclerotic, stalemated, gridlocked and in need of some kind of conspicuous renewal…
Both right and left are reacting, in different ways and with different prescriptions, to the sense of crisis and futility in our politics, the feeling that surely some kind of revolution or transformation is due to come around — that God in his wisdom is overdue to send us a Lincoln or a Roosevelt and that the existing norms of our politics probably won’t survive the change.”
Unfortunately, for the entire West, it’s a case of…
“Così non si può andare avanti”.
Reform is overdue, if some kind of revolution, left or right, is to be avoided. But the reform must go in the direction of greater social cohesion: more economic equality and social solidarity; less, much less, identity politics and divisions - which, I insist on this point, are financed by elites as distractions from the important national tasks.
As an example, this NYT piece on “incivility” has the right order of priorities: distributive justice, (for America) racial and ethnic justice (almost inapplicable to Australia), greater gender equality. The writer duly leaves out “identitarian” garbage, which includes the tragic lie of “the right to bear arms”… because it distracts and, worst of all, it divides and enervates the polity.
Tuesday 24 May 2022
When you find a moment, you may want to have a quick perusal of this stunning Michelle Goldberg piece in the NYT.
It will demonstrate why, as I keep arguing, the political is personal always, and the personal is rarely political. Because political power, not personal leanings, is what rules the world.
What Goldberg leaves out is that politics has turned conservative if not reactionary, and is crushing the personal of identity politics for the precise reason that the "progressives" grossly misjudge the real needs of people in societies as they are and have been for millennia!
The Left can and will NEVER match "the political strength" of the Right, as Goldberg calls it, because the Left idealises the needs of the vast majority of people, which are very material and very narrow and..."practical".
One thing I learned at Uni and as a lawyer is how inner city types think they can change REALITY by simply changing how they DESCRIBE it! (That's Goldberg's point - something on which I focused 40 years ago.)
An example: I am and always have been "a walking dictionary" (at least since my brother bought me The World Encyclopaedia Dictionary in 1975).
But I never knew the word "TEAL" because it is a very specific colour hue adopted by architects and painters, perhaps. So you can see how these people totally distort political reality by simply giving themselves a new LABEL!
NOTHING CHANGES! NOTHING WHATSOEVER! If anything, things get worse - "things fall apart". But these people delude themselves and others that they are in control. They will find out soon enough the real state of affairs...
"Progressives sometimes seem to believe Breitbart’s maxim as well, acting as if the way to change the world is to change how we describe it. At best, the left’s ever-shifting language rules can push social norms in a more decent direction. At worst, they’re obscurantist and alienating. Either way, they reflect a choice about where to focus political energy."
And “political energy” is exercised most powerfully by expressing the material practical needs and interests of people, not by seeking to deflect attention from them through empty slogans and labels. Ultimately, reality catches up with dreamy ideologues…
Saturday 21 May 2022
My good friend Paul Monk in The Oz likens the challenge Australians face to defend what is left of the “public thing” (the res-publica) to what the Greek city-states confronted in their epic struggle against the vast Persian armies cobbled together by the various kings (Cyrus, Darius) in the fifth and fourth centuries B.C. (Before Christ).
Alas, the historical analogy is mistaken, and this also vitiates the political analysis. However much the autocracies (China, Russia) may seem to resemble the Persian Empire, the reality remains that the present-day empires (and one could add here Turkey, Iran and India) are immensely more homogeneous and cohesive than the loose confederation of satrapies that the Persian kings tried unsuccessfully to knit together into a compact network. And this is because the modern autocratic empires benefit in part from religious fanaticism (Iran, Turkey and India) and in part from truly horrific mediatic propagandistic networks that easily assure them popular support and consensus through disinformation and indoctrination.
Not only. But on the Western side we have a historical configuration far more akin to that of the Late Roman Empire internally economically stagnating and defeatist through the undermining pacifism and passivity of rising Christianity.
The Greek polein or city states, like the early Roman Republic, were made up of fiercely independent slave landowners who took a very active part in the running of the polis or city-state (whence the word “politics”) for which they were more than prepared to give up their lives. (Amazingly, Ukraine has turned out to be a very unlikely emulator of that ancient spirit.) The same obviously and emphatically does not apply to Western societies, for reasons that I have been articulating seriatim (from time to time).
Far be it for me to criticise my valiant and capable friend (I like his reference to Dennys Prior of the Classics Department whom I remember fondly). But the justice of my objection is hardly confutable - alas!
My uni friend Paul Monk is a TRUE PATRIOT, one of the few left. He deserves a monument!
Friday 20 May 2022
Jacob Greber in the AFR captures (how wittingly? only accidentally?) the social and political catastrophe that Western bourgeoisies have brought upon themselves and upon their countries with reference to today’s elections in Australia:
“It may well turn out be a definitive election that breaks down the “big-tent” policy models of both Labor and the Coalition. No doubt many would hope this vote ends the past decade of turmoil and uncertainty and weak policy. But it may turn out that the post-2010 period was merely a warm-up session.
Governing in the social media- and smart-phone age, which has slashed the cost of entry for hucksters and political charlatans, and supercharged the power of tiny but noisy minorities, has been getting harder worldwide. It has upended traditional political alliances and undermined the old political institutional stability that only dominant, competing, political parties could guarantee.
Governments have become scrappy, in both style and perception, since the early 2000s. So much so, that the durable models demonstrated by Bob Hawke/Paul Keating and John Howard are at risk of becoming the historical exceptions to the rule of chaos and toothless, temporary leadership.”
Thursday 19 May 2022
This article in Le Monde by two sociologists advances my contention that "populism" originates from the disappearance of quality employment for the middle classes.
I'm not entirely happy with this formulation of the problem: I think it is the "liberal professions" in particular that have been demoted in terms of status and income, and therefore of political independence and influence.
I have nearly all Rodrik's works (he's at Harvard). The limit of his approach is the failure to link "globalisation" to the essential dynamics of capitalist industry.
Wednesday 18 May 2022
In the short extract below, the NYT writer refers to my favourite political theoretician of the last century, Hannah Arendt (my most popular piece, The Philosophy of the Flesh, borrows her words for the title and is a lengthy analysis of her “The Life of the Mind”).
Here is the extract:
“The experience of reading Hannah Arendt’s 1951 classic “The Origins of Totalitarianism” in the year 2022 is a disorienting one. Although Arendt is writing primarily about Nazi Germany and Stalinist Russia, her descriptions often capture aspects of our present moment more clearly than those of us living through it can ever hope to.
Arendt writes of entire populations who “had reached the point where they would, at the same time, believe everything and nothing, think that everything was possible and that nothing was true.” She describes “the masses’ escape from reality” as “a verdict against the world in which they are forced to live and in which they cannot exist.” She points out that in societies riddled with elite hypocrisy, “it seemed revolutionary to admit cruelty, disregard of human values, and general amorality, because this at least destroyed the duplicity upon which the existing society seemed to rest.”
[You can listen to this episode of “The Ezra Klein Show” on Apple, Spotify, Google or wherever you get your podcasts.]
It’s hard to read statements like these without immediately conjuring up images of Vladimir Putin’s Russia or Donald Trump’s presidency or the QAnon faithful. But that’s exactly the point: The reason Arendt is so relevant today is that her diagnosis doesn’t apply just to the Nazi or Soviet regimes she was writing about. It is more fundamentally about the characteristics of liberal societies that make them vulnerable to distinctly illiberal and authoritarian forces — weaknesses that, in many ways, have only become more pronounced in the 70 years since “The Origins of Totalitarianism” was first released.”
Note that the writer refers to Putin and Trump…but not to Xi! Unforgivable.
But the biggest omission is that the reason why Western publics are ripe for authoritarian turns is that the “normality” of their everyday life has been SHREDDED by the elites (to facilitate “globalisation”). From social media, to cancel culture to sexual and gender trauma, citizens emit “a verdict against the world in which they are forced to live and in which they cannot exist [wherefore in societies riddled with elite hypocrisy] it seemed revolutionary to admit cruelty, disregard of human values, and general amorality, because this at least destroyed the duplicity upon which the existing society seemed to rest.”
This systematic destruction of, first, normality, second, solidarity, and third, security is the reason why our societies are becoming utterly and irreparably ungovernable!
The mistake of the “liberal” elites is to think that the real problem is populism when in reality populism is a REACTION to the social devastation of bourgeois “liberalism” both in the ethical-moral AND in the political-economic spheres!
Monday 9 May 2022
Sunday 8 May 2022
And almost to prove my theories AND Ross Douthat's account, here is Maureen Dowd attacking the conservative judges on the Supreme Court WHILST WHOLLY IGNORING the politico-economic reality that these elite Republican judges are THEMSELVES exploiting these "woke" issues TO MAINTAIN CLASS DIVISIONS!
Here Democratic and Republican elites exploit MORAL beliefs TO MAINTAIN CLASS DIVISIONS!
But class conflict, which both US parties wish to conceal behind the "judicial screen" of court-made law (removed from Congress) actually comes back to haunt the American polity!
These same dynamics are playing out in Australia, as is made plain by the current electoral campaign!
Saturday 7 May 2022
I don’t want to argue with these interpretations so much as take note of them, while offering a different view of abortion’s place in the American republic’s discontents. I share some of the anxieties that inform the liberal master narrative these days — about a country too deeply polarized to function, a populist right that’s steeped in paranoia, a decay of the norms that allow republican government to function. But if I set out to write a story about how exactly we got here, I would place the original Roe decision near the center of the narrative — as an inflection point where the choices of elite liberalism actively pushed the Republic toward our current divisions, our age of chronic strife.