There’s a great Sherlock Holmes story called “Silver Blaze”, where a star racehorse is stolen the night before a big race and his trainer is murdered. Scotland Yard is baffled, of course, but the GOAT consulting detective figures it all out with typical panache. Here’s the big reveal:
Det. Gregory: Is there any other point to which you would wish to draw my attention?
Holmes: To the curious incident of the dog in the night-time.
Det. Gregory: The dog did nothing in the night-time.
Holmes: That was the curious incident.
I like to think of myself as a consulting detective.
Not a real world detective, of course … too boring and too dangerous for my taste, at least as I understand the work. But a market detective? A narrative detective? That works.
I’ve found, though, that one of the occupational hazards of being a narrative detective (and I suppose this is an issue for real world detectives, too) is that I am always examining objects that exist. Hmm … Apple is going to announce earnings tomorrow; I wonder what the narrative around the new iPhone looks like? Hmm … that Khashoggi murder is all over the news; I wonder what the narrative around Saudi and Saudi-linked entities looks like?
I get so used to looking for the things that I know exist, that I forget to look for the things that don’t. And that’s a mistake for any detective, for anyone trying to figure out the Why of the world. Because as Holmes showed, the ABSENCE of a thing can tell us as much about the Why of the world as the presence of a thing.
There’s a dog that didn’t bark in the midterm campaign. And its silence tells me a lot about where this country is going.
Anyone remember the Fiscal Cliff of January 2013, when markets swooned over a deficit-driven government shutdown? When U.S. debt was downgraded over the budget deficit? When the Sunday politics shows were awash in words like “sequestration” and “CBO projections” and “debt ceiling”? Ah yes, those were the days. That was a barking dog.
What a difference 6 years can make. Here’s the narrative map of all Bloomberg articles from October 2017 – October 2018 that have anything to do with the US budget deficit.
This is 25 measly articles over the course of a year. This is the ABSENCE of a narrative. This is a dog that is NOT barking.
And it’s not because the US budget deficit problem is getting better. On the contrary, the budget deficit is soaring. The difference between 2012 and 2018 isn’t in Reality-space, but in Narrative-space. The difference between 2012 and 2018 isn’t that the budget deficit has gone away. It’s that no one is talking about it. It’s that no one CARES.
So what does it mean that no one is talking about US budget deficits? What does it mean that political entrepreneurs and Missionaries see no advantage in shaking their fingers at us about that god-awful deficit? What does it mean that Austerity! has disappeared in Narrative-space?
For starters, it’s definitely an equity market positive. It’s the ABSENCE of a negative narrative, and it UNBLOCKS positive narratives like Infrastructure Spending! that Wall Street can promote. In the two days since the midterms, I’ve received five sell-side reports on companies poised to do well when Congress passes the inevitable Trump infrastructure spending bill. I mean … who’s going to say no to this?
How does this all end? The same way that the removal of any big countervailing narrative always ends. It ends in massive excess. It ends in tears.
Unless and until a Budget Restraint! narrative reappears, there will be no budget restraint. There will just be spending. There will just be fiscal stimulus. Now, it won’t be called spending. It won’t be called stimulus. It will be called “investment”. You know, like “investment in our future” or “investment in our country” or “investment in our crumbling infrastructure”. Because who can be against “investment”?
And people still ask me how it’s possible to have an inflationary world.
This is how Things Fall Apart. Not with a bang. Not with a whimper. But with the excess of an unrestrained government.