What The Bulls Must Believe
Via Sean Corrigan of Diapason Commodities' Tangible Ideas,
Even if the monetary fuel for this whirl of self-reinforcement is not lacking, the market still needs a narrative around which it can cluster psychologically. It needs a canon of shared myth about which the bard can weave a reassuringly familiar refrain so as to reinforce the sense of community when the members of the clan gather to listen to his warblings amid the flickering fires and guttering torchlight of the Great Hall at night.
If, in contrast to the slow?evolving customs of traditional society, the tribe we personify as the Market is a promiscuous sort, ever ready to cast off one cycle of songs for another, it nevertheless becomes fiercely, if fleetingly, fanatical about the one which happens to take its fancy at any given time. We may have traded Homer for Hendrix, Mallory for Metallica, and Snorri Sturulson for Seasick Steve, but we are still all suckers for a good saga.
As far as your author can see, the one presently enjoying the greatest vogue contains several key themes, among them:?
(a) the belief that China will successfully re?organize itself without enduring a wrenching and potentially disastrous financial dislocation and that it will turn from a hotbed of smokestack centralism and price?insensitive cronyism into a gleaming wonderland of happy, freemarket consumers without its published growth rate ever dipping much below 7% per annum;
(b) the even more fervent hope that ?Abenomics? is working: that a materially well?endowed bastion of greying penny?pinchers will be so spell?bound at the artificially?induced jump in its stock markets and so bamboozled by the thought of having prices go up, instead of down, that its garrison will instantly rush to the nearest Mall and liquidate its surplus savings in an orgy of long?suppressed self?indulgence – all without threatening the ability of the world?s second largest debtor government to continue to sell enough bonds to make up the ~50% shortfall it suffers between revenue and outlay or without pushing up the interest rate payable thereon beyond the hefty 25% of taxes it currently absorbs;
(c) the lazy assumption that, post?Cyprus, nothing significant can now go wrong in Europe, that debt spreads will continue to shrink, and that outbreaks of both social unrest and secessionism can readily be quelled by the mere hypnotic suggestion of that latter day Mandrake the Magician who heads the increasingly fractious governing council of the region?s central bank. And, if that were somehow not enough, we can rest assured that ?austerity? is behind us and a restorative shot of crude Keynesianism lies only an X on a German ballot?paper away;
(d) and finally, the spreading confidence that the Goldilocks Republic has again entered the broad uplands of that Panglossian La?La land where all evidence of economic strength is a heartening testimony to the ongoing US recovery but where, miraculously, any contrary signs simply ensure that the nation?s tutelary deities at the Fed will redouble their efforts at stimulus, especially once that curmudgeonly old tightwad, Ben Bernanke (“I have the best inflation record of any post?war Chairman”), yields his staff of office to a real interventionist.
What could possibly go wrong?