Author : John E. Charalambakis
Date : March 29, 2017
“Zadig” a.k.a. “Destiny: An Oriental Story” and “Micromegas” were two of Voltaire’s philosophical tales dated back in the middle of the 18th century. In the former Voltaire explores the reason’s inability to penetrate the deep mysteries of life as the enigma of the universe eludes us. Zadig the hero is obliged to flee to Egypt where he contemplates the greatness of the universe and the littleness of us humans. In his travels Zadig learns the secrets of the doctrine called Optimism that teaches humankind that everything in the world has its purpose. Later on and as the Hermit – his companion – transforms into an angel, Zadig learns how he should avoid judging things from their appearance since powers that we cannot control can transform evil into good.
In “Micromegas” and under the sugar-coated guise of fiction the reader is swept along the author’s ideas. Prior to that he had published the work “Babouc or the World as It Is” introducing the audience to the concepts of realism that became the underlying geopolitical philosophy more than two hundred years later. “Micromegas” as the root of the two words imply reflects the “little great man” symbolizing that hugeness does not necessarily reflect ability to judge things and circumstances. As Micromegas visits the earth he contemplates “I have seen none who did not have more desires than real needs, and more needs than satisfaction…each is more conscious of what he wants than what he has. Man is finite; the more he possesses, the more he desires, and rare is he who knows the secret of that contentment which lies within.” Later on the Micromegas will express astonishment of the excess of madness that ruins and self-destructs humanity, all because of a pride “almost infinitely great”. Micromegas ends up promising his hosts (us humans) to draft exclusively for them a book on the philosophy of life. In that work the hosts will find the riddles of the universe explained. As the hosts take the book to the Academy of Science in Paris and the secretary opens it, they see nothing but blank pages. So it is then that Zadig’s questions become clearer and more pointed with the blank pages of Micromegas.
The markets’ conundrum may be a mystery wrapped in a riddle of an enigma. However, hints may be all around us as we look at some important dynamics, such as:
– Global macroeconomic development
– Debt accumulation
– Geopolitical development
– Credit availability
– The cyclical nature of upswings and downturns
For the short term and as the graph below shows, we can decipher that global recovery continues and based on the latest PMIs that signify economic activity, above-trend GDP growth should be expected for the remainder of this year.
Consumer confidence stands at very high levels and as consumers’ debt relative to their incomes drops (see graph below), spending should increase which should boost growth and earnings. To that we should also add the fact that global trade stands at seven-year high, another indication of above-average GDO growth rate.
Having said that, we cannot ignore the reality that corporate debt is very high and as the figure below demonstrates, at some point the accumulation of debt will start biting profits and raise concerns, given that bonds are overvalued. Of course to that, we should recall our previous concerns about unsustainable debts and unfunded liabilities.
Given the cyclical nature of some but not all things, we could conclude that for now the trend is optimistic and if something is to interrupt this upswing is unbalanced political developments that will inflict uncertainty into the picture.