The story of humankind has been a long tale of war, tyranny, misery, conflict, and illiberalism. To that extent the recent decades of relative peace and prosperity, along with the rising middle classes and democracy around the world is a historical aberration. From the 16th century until about the middle of the 20th century hardly a year went by without a war and conflict among the most powerful powers of the day. However, since the end of WWII, billions of people have been lifted up from poverty, growth is uplifting the fortunes and destiny of many nations, while democracy is expanding from less than ten countries in the middle of the 20th century to more than one hundred nations nowadays. Who is to be credited for such progress a.k.a. the liberal order? In one phrase we could say institutions that advance competition, free trade, transparency, meritocracy, education, training, democracy, and the moral development of society.
If history is “the progress of the consciousness of freedom” as Hegel proclaimed, then, the march to liberal democracy and human progress would have been inevitable as Fukuyama and his “End of History” advertised. However, whether determinism exists or not, the economic evolutionary process is neither deterministic nor predisposed to improve human ethos, nature or behavior. History is not marching towards enlightenment since it is full of dark ages and we do not need to go back to the 16th and 17th centuries to affirm that. We just need to look at the consequences produced by revolutionary nationalism in the first half of the 20th century from Russia to Europe. Fascism, totalitarianism, along with famines and great leaps backwards are the outcomes of illiberal societies that advance tribalism and authoritarianism.
The creation of the institutions that have advance economic and technological progress, along with democracy around the world is the “product of unique set of circumstances contingent on a particular set of historical outcomes” as Robert Kagan discusses in his book The Jungle Grows Back. Kagan continues and elaborates on the argument that if it were not for the United States of America and its ideology founded on the liberal principles of the Enlightenment which advanced free market principles along with the protection it afforded to the world, the jungle would have suffocated human progress.
Where are we today? The garden of what we thought as natural progress has been cultivated by leaders who admire authoritarianism. At the same time, unnatural economic forces such as negative interest rates, admiration of debt, pursuit of growth via deficits, a culture of overextended corporate financials, and the desire for quick exits from placements which promote a climate of speculation rather than investments, formulate a myopia in our political and economic perspective which is said to be cured by distorting lenses that advance bubbles. Hence, we created the biggest bubble of all, the bond bubble which we still inflate via lower rates and nowadays via negative rates.
Just a couple of hours ago the ECB announced additional monetary stimulus/measures (involving even lower negative deposit rates as well as bond purchases of €20 billion/month) due to protracted structural weakness resulting from the deteriorating global trade. And this is part of the argument in these random thoughts: the structural integrity of the global economic system is being jeopardized due to the undermining of the fundamental institutional structure that has advanced the much-desired historical aberration of the last seventy years.
The unfortunate thing is that such undermining is further promoted by tweets like the following:
“They are trying, and succeeding, in depreciating the euro against the VERY strong dollar, hurting US exports . . . And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”.
If the US falls into the trap of undermining the greenback then possibly all hell can break loose like it did throughout the 1970s (if it was not for Paul Volcker and his enlightened leadership at the Fed, the US would have fallen again into a depression), given that the global economy operates in an unnatural environment of over-indebtedness, overvaluation, trade uncertainty, and negative rates.
A Few Random Thoughts on Economic Structural Integrity: Global Order Meets Finance
Author : John E. Charalambakis
Date : September 12, 2019
The story of humankind has been a long tale of war, tyranny, misery, conflict, and illiberalism. To that extent the recent decades of relative peace and prosperity, along with the rising middle classes and democracy around the world is a historical aberration. From the 16th century until about the middle of the 20th century hardly a year went by without a war and conflict among the most powerful powers of the day. However, since the end of WWII, billions of people have been lifted up from poverty, growth is uplifting the fortunes and destiny of many nations, while democracy is expanding from less than ten countries in the middle of the 20th century to more than one hundred nations nowadays. Who is to be credited for such progress a.k.a. the liberal order? In one phrase we could say institutions that advance competition, free trade, transparency, meritocracy, education, training, democracy, and the moral development of society.
If history is “the progress of the consciousness of freedom” as Hegel proclaimed, then, the march to liberal democracy and human progress would have been inevitable as Fukuyama and his “End of History” advertised. However, whether determinism exists or not, the economic evolutionary process is neither deterministic nor predisposed to improve human ethos, nature or behavior. History is not marching towards enlightenment since it is full of dark ages and we do not need to go back to the 16th and 17th centuries to affirm that. We just need to look at the consequences produced by revolutionary nationalism in the first half of the 20th century from Russia to Europe. Fascism, totalitarianism, along with famines and great leaps backwards are the outcomes of illiberal societies that advance tribalism and authoritarianism.
The creation of the institutions that have advance economic and technological progress, along with democracy around the world is the “product of unique set of circumstances contingent on a particular set of historical outcomes” as Robert Kagan discusses in his book The Jungle Grows Back. Kagan continues and elaborates on the argument that if it were not for the United States of America and its ideology founded on the liberal principles of the Enlightenment which advanced free market principles along with the protection it afforded to the world, the jungle would have suffocated human progress.
Where are we today? The garden of what we thought as natural progress has been cultivated by leaders who admire authoritarianism. At the same time, unnatural economic forces such as negative interest rates, admiration of debt, pursuit of growth via deficits, a culture of overextended corporate financials, and the desire for quick exits from placements which promote a climate of speculation rather than investments, formulate a myopia in our political and economic perspective which is said to be cured by distorting lenses that advance bubbles. Hence, we created the biggest bubble of all, the bond bubble which we still inflate via lower rates and nowadays via negative rates.
Just a couple of hours ago the ECB announced additional monetary stimulus/measures (involving even lower negative deposit rates as well as bond purchases of €20 billion/month) due to protracted structural weakness resulting from the deteriorating global trade. And this is part of the argument in these random thoughts: the structural integrity of the global economic system is being jeopardized due to the undermining of the fundamental institutional structure that has advanced the much-desired historical aberration of the last seventy years.
The unfortunate thing is that such undermining is further promoted by tweets like the following:
“They are trying, and succeeding, in depreciating the euro against the VERY strong dollar, hurting US exports . . . And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”.
If the US falls into the trap of undermining the greenback then possibly all hell can break loose like it did throughout the 1970s (if it was not for Paul Volcker and his enlightened leadership at the Fed, the US would have fallen again into a depression), given that the global economy operates in an unnatural environment of over-indebtedness, overvaluation, trade uncertainty, and negative rates.