The macrofinancial switchback of COVID-inflation-interest rate hikes has put the global market for fixed-income securities, valued at c $130 trillion, on the rack. The spring of 2023 has seen historically exceptional turbulence, and a sense of foreboding, as other shocks seem to lie ahead. The weakest borrowers have been cut off and some have slid into crisis. As ever, the authorities, above all in the US, have been there to provide a measure of derisking to exposed banks and shadow banks in the core of the system. But what does that mean? Daniela Gabor and I have been going back and forth in recent days on how to characterize this situation.
To overly simplify: I think we’re going through an era of paying for a few decades of unnecessarily, gratuitously low interest rates and off-shoring of jobs. Also complicating things: The Powers That Be are happy with elected officials and their appointees who support a distorted economy that enriches said elite at the expense of everyone else.
Glad to see the polycrisis series gathered together here and tracking. What's on the other side of this "shift" worries me. Particularly as sovereign conflict edges out economic cooperative strategies for growth.
Great post Adam! At what point can we issue a verdict on whether or not the BOJ experiment was successful or not? It seems policy makers continually get a free pass. It's very plausible losses are being locked in if fixed income assets are being sold around the world now to repatriate yen. That is a fail imho and a place to start. CB around the world are fighting problems in large part created by them - had QT begun earlier, balance sheet unwinds wouldn't be as painful.
Polycrisis? If there is a reliable way to put a looming crisis on formula, then you can let someone handle it. What cannot be put on formula should be handled by central banks, bank managers or the manager of the company where I work.
For me, a polycrisis means a situation where you can expect more attacks on the current order, and that you don't know where the attacks are coming from. So: Management under uncertainty, which is business as usual.
"... I prefer to avoid talking about regimes or a derisking state", terms which seem to imply a degree of institutional robustness that reflect what you might call a substaltivist conception of power, rather than something more fluid, quicksilver (now you see it and now you don't and improvised."
This is certainly an extremely important debate and I hope you continue to explore it. I also wish you would be a little more clear on your own biases in this discussion. Is there a linkage, for example, in your critique of Gabor with your critique of the realist thought of Mearsheimer-- "if we merely wave our hands, or assume an automaticity from structural conditions to action," (concerning Measheimer) to your recent comments on Gabor's "derisking state."
Does your conception of "statecraft" as missing in Mearsheimer serve the same purpose as "fluid" in disagreeing with Gabor?
Is this talk about a change in Japanese monetary policy being driven by people not happy with having Japan as a successful example of different monetary policy to the neoliberal monetary policy inflicted on the rest of the world?
Hmmm. Feels more 'conjectural' to me. In either event, when adrift, one could do worse than look into deep history for how our species has dealt with perplexing circumstances. Is it unreasonable to assume Homo saps current responses/solutions will most likely rhyme with our history and the building blocks of our thoughts? Proceeding then, etymology suggests one looks to the PIE (Proto-Indo-European) roots of "con-" and "-yeug". Applying Occam's razor to the second root simplifies to "-ye", thus, going from "conjuncture" to 'conjecture'. From together+join/yoke to a together+cast/throw. For the visual learners this link should give you a pretty good idea how the current quandary, if it comes to last resorts, will essentially be solved,
Considering all you lay out here regarding the polycrisis, US Treasuries, global CBs & financial hegemony, I wonder if you have a perspective on what role of commodity markets (precious metals) have played or will play.
To overly simplify: I think we’re going through an era of paying for a few decades of unnecessarily, gratuitously low interest rates and off-shoring of jobs. Also complicating things: The Powers That Be are happy with elected officials and their appointees who support a distorted economy that enriches said elite at the expense of everyone else.
Glad to see the polycrisis series gathered together here and tracking. What's on the other side of this "shift" worries me. Particularly as sovereign conflict edges out economic cooperative strategies for growth.
Great post Adam! At what point can we issue a verdict on whether or not the BOJ experiment was successful or not? It seems policy makers continually get a free pass. It's very plausible losses are being locked in if fixed income assets are being sold around the world now to repatriate yen. That is a fail imho and a place to start. CB around the world are fighting problems in large part created by them - had QT begun earlier, balance sheet unwinds wouldn't be as painful.
Polycrisis? If there is a reliable way to put a looming crisis on formula, then you can let someone handle it. What cannot be put on formula should be handled by central banks, bank managers or the manager of the company where I work.
For me, a polycrisis means a situation where you can expect more attacks on the current order, and that you don't know where the attacks are coming from. So: Management under uncertainty, which is business as usual.
"... I prefer to avoid talking about regimes or a derisking state", terms which seem to imply a degree of institutional robustness that reflect what you might call a substaltivist conception of power, rather than something more fluid, quicksilver (now you see it and now you don't and improvised."
This is certainly an extremely important debate and I hope you continue to explore it. I also wish you would be a little more clear on your own biases in this discussion. Is there a linkage, for example, in your critique of Gabor with your critique of the realist thought of Mearsheimer-- "if we merely wave our hands, or assume an automaticity from structural conditions to action," (concerning Measheimer) to your recent comments on Gabor's "derisking state."
Does your conception of "statecraft" as missing in Mearsheimer serve the same purpose as "fluid" in disagreeing with Gabor?
Is this talk about a change in Japanese monetary policy being driven by people not happy with having Japan as a successful example of different monetary policy to the neoliberal monetary policy inflicted on the rest of the world?
"pandemic-Trump-China-Russia-inflation-climate conjuncture" ... "conjunctural seachange"
Hmmm. Feels more 'conjectural' to me. In either event, when adrift, one could do worse than look into deep history for how our species has dealt with perplexing circumstances. Is it unreasonable to assume Homo saps current responses/solutions will most likely rhyme with our history and the building blocks of our thoughts? Proceeding then, etymology suggests one looks to the PIE (Proto-Indo-European) roots of "con-" and "-yeug". Applying Occam's razor to the second root simplifies to "-ye", thus, going from "conjuncture" to 'conjecture'. From together+join/yoke to a together+cast/throw. For the visual learners this link should give you a pretty good idea how the current quandary, if it comes to last resorts, will essentially be solved,
https://www.youtube.com/watch?v=ciUd0f5Xjos
Yup, the old ever reliable casting of the bones. You think I'm yoking?
Considering all you lay out here regarding the polycrisis, US Treasuries, global CBs & financial hegemony, I wonder if you have a perspective on what role of commodity markets (precious metals) have played or will play.