Every morning, we run The Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.
But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.
The yield on 10-year German government bonds has declined to its lowest ever, reaching -0.213% on Friday. That’s almost a basis point below the previous low, reached on July 6, 2016.
ECB President Mario Draghi can expect to get grilled at the press conference about what he has left in the toolbox to counter the headwinds assailing the economy. If the bond market doesn’t like what it hears, the benchmark German yield could yet plumb new depths.
It’s the truest thing I know about the State.
What begins as emergency government action ALWAYS becomes permanent government policy.
I’m not saying this is good. I’m not saying this is bad. I’m saying that it IS.
In the summer of 2012, Mario Draghi took emergency action to save the Euro system. There wasn’t actually much action, but the WORDS and the NARRATIVE that Draghi set in motion with his “whatever it takes” speech in London was enough.
But as ALWAYS happens in an entrenched, self-interested bureaucracy, the policies designed to be part of that emergency action … the liquidity programs and the balance sheet expansion and all that goes along with pushing interest rates into negative-world … they kept going long after the emergency was past. Because there’s always another target for your bazooka. Because that’s what entrenched, self-interested bureaucracies DO.
So now here we are, where “whatever it takes” has morphed from saving the entire European project to … [checks notes] … preventing a garden-variety recession.
But as mad as I get at the mandarins in Frankfurt and Washington and Tokyo, there’s someone who bothers me even more.
From Magical Thinking …
Yep, at first I was disappointed in them. But on reflection I became more and more disappointed in us.
See, the problem isn’t with the Fed. They’re going to do what solipsistic, magical thinking priest-kings have done for ten thousand years … more of THAT. More solipsism. More magical thinking. More 4 year old egomaniacal determination that their spell casting efforts are the ONLY thing that stand between us and utter ruin.
No, the bigger problem is with us. The bigger problem is that we cannot imagine a solution for our current economic and political problems that does not rely on greater and greater state-directed spell casting. Monetary policy spells not working? Well, golly, I guess our ONLY alternative is to try some fiscal policy spells. Really? That’s the best we can come up with? I understand that this is what the courtiers are going to say. But I expect more from the rest of us. I expect more from myself.
It’s time to expect more. Not from Draghi or Powell or their cultists, but from us and from me.
It’s time to expect more from the Pack.