World Economy: Cheer up, the worst is yet to come
Philander Chase Johnson is not a household name. Given the Christian name Philander, are we surprised? Adolf proved considerably more popular in The Times’ name rankings during the 1930’s. However Mr. Johnson, a columnist and wit, penned a memorable line while encouraging readers to plough through a particularly dire article early last century with the splendid invocation “Cheer up, the worst is yet to come.”
(Thanks to contemporary digital wonderment where internet folks can crowd source their ignorance, many erroneously ascribe that remark to Mark Twain. Contrary to popular belief he didn’t attain the monopoly in quips which Standard Oil sought in greasy combustibles).
Mr. Johnson’s pithy remark sprang to mind when somebody asked me recently to describe the world economy. For those of you who can recall the longer term perspective in the 24 digital hour news cycle, like, say, last Thursday, it looked as if we were on the precipice of disaster. China had flung its equity markets off a cliff and that tricky gravity/kinetic energy intersection wasn’t implying a soft landing. Oil was in freefall, the House of Saud imperiled while volatility soared as markets tumbled.
A few days later, we’re vaguely pausing for breath. This is a common linear function. Markets simply cannot go down every day, just as in hyper-breezy good times, they don’t always go up either. Moreover, don’t be surprised if the early zeitgeist of looming disaster in January markets turns into a crisp rally. Once the mainstream media has caught hold of a downtrend, it’s usually time for a reversal of some sort.
That said, we’re at an inflection point. Call it masculine intuition if you wish, I sense a certain preponderance of elements coalescing, none of which encourage investor purchases. The political pygmy class loosely responsible for government across the West has lost the plot. The physics of debt denial - “Kickcanistan” - are unraveling. That said it is not all bad news – ‘Davos Man’ has returned to his annual blob nesting place for a convivial backslap and discovered he will soon be replaced by Davos Robot. (Having met folks who deem WEF-week a worthwhile trek I frankly think it will be tough to discern the difference between the robots and the average Davos delegate).
Having long lost the plot, none of the world’s governments have yet thought of launching a mission to find it again. Thus I fear we sit on the cusp of a Western lost decade leaning abyss-ward ho. There is no resolution to tackle the debt mountain, the EU has lost the growth habit, and Obama’s Presidency will end with US debt nearly doubling to $20 trillion while some 70000 pages of new regulation per annum strangle innovation. Mrs. Merkel sees her aging workforce labor crisis resolved by foreigners who are apparently groping in the dark without grasping the rudiments of Western civilization. (This comes as a disappointing reflection for somebody rather reflexively pro-immigrant).
Meanwhile the euro festers in the background, a ticking time bomb alongside Quantitative Easing, that massive parachuting of funny money into the banks for no other good reason so far as I can see, than politicians seeking lucrative directorships when the electorate ousts them. True, some rejected politicians end up running the EU (others jump before they are pushed). Thus Europe is run by one President whose eight years as Prime Minister involved looting the nation’s private pension funds while his counterpart, allegedly a legend in his own lunchtime, couldn’t manage the Luxembourg secret service, even during his most lucid mornings. Quick fixes with illusory economics are only postponing an inevitable ‘megashock’.
President Hollande’s latest artificial job creation agitprop clearly demonstrates the void between the political classes and economic reality. Even circulating a memo which begins “Contrary to popular political convictions, money does not grow on trees,” would be a start. Hollande indeed compares unfavorably even with all the other spendthrift economic illiterates who have presided over the 5th republic. An achievement, albeit of fiscal perversity. When France collapses (it’s essentially inevitable) then all bets are off. Fret not about Schengen or the Brexit pantomime, forget the euro...it’s the EU which is finished. The big Kahuna is coming to devastate the whole farcical notion of BDSM economics binding disparate continental countries into one ‘superstate’. Fifty shades of economic stupidity are coming to an end after the blob has swathed the populous in hair shirts. Asia will rise again while the US pulls through, provided somebody just burns a million pages of red tape and lets the invisible hand deliver growth once more. That road to salvation is open to anybody...but Europe is perversely fixated with the lure of becoming the next 1970’s South American economic disaster zone.
Welcome to the hiatus in world markets. It might last weeks, even months, but remember the broader trend: “Cheer up, the worst is yet to come.”
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.