A Crisis of Confidence in Leadership
The video below is an interesting and worthwhile financial, political, and COVID analysis that includes both Europe and the U.S.
At 17:54, Rana Foroohar spoke about the difficulty of doing anything big because any of the people with enough free time and energy to actually move the needle on how our society works in any significant way have been conveniently captured in it because they are heavily invested in it. They would have to literally put a decent dent in their (relatively) ample fortunes to benefit their fellow humans. If they have $250,000 in a 401K and it drops to $125,000 but, in 5-10 years, the economy will have been restructured in a way that’s much more equitable, where that $125,000 will go a much longer way and there are more free services or they’re much, much cheaper—e.g. housing, schooling, health-care—so you don’t have to pay for so many things yourself and your $125,000 will actually feel very much like the original $250,000—if not more—which is actually a pretty likely outcome if we actually did something good for once, but you’d have to trust that that would happen and people aren’t going to get past that huge snag that the number got smaller for themselves, personally.
“Rana Foroohar: The reason I worry so much about a market correction at the beginning of the Biden administration is that, a lot of people, they’re not thinking that big shift that needs to happen. They’re just thinking ‘My God, if my 401k—we’re so asset-bubble–based—if my 401k goes down at all, then the Biden administration has screwed up. And that thinking, that very shallow thinking, the political ramifications of it, are what I am worried about, particularly in advance of the midterm.”
Translation: people are horrific egotists and will vote for their own, short-term interests, even if those are diametrically opposed to their own medium- and long-term interests. The interests of anyone they don’t know don’t enter into it.
At 40:00, Blyth goes into what I—as a long-time listener—would call a quintessentially Blythian not exactly diatribe, but pure content without pulling any punches. He just gets into a flow where nearly every sentence is a great point. He talks about budgeting on a state level (basically, the thesis of his fantastic book Austerity, which I read in 2015), but also about how Europe’s and China’s problems—dithering/incompetence and fear of state confiscation, respectively—make the U.S. dollar as short- and medium-term reserve currency a much more viable option than you’d at first think. He finishes up by talking about (mostly deficient) political responses to COVID-19 and the resulting crisis of confidence.
“Mark: Let’s think about the model that constrain us here. And I don’t mean sort of the fancy, formal ones. I mean the informal ones in our heads. Most people do not understand that governments are not like households. Most people do not spend their time thinking about the difference between money and high-powered money and bank reserves and all of the rest of the stuff that makes government’s ability to finance itself qualitatively different from households.
“We love that household analogy: we’ve gotta tighten our belts, don’t spend too much, all that sort of stuff. If you put through BIden’s proposals and add it to the CARES package, the United States, in 2020 and 21 will spend more money than it spent in the entire New Deal period, inflation-adjusted. And that’s without then saying ‘everybody gets a paycheck until all this is over.’
“Now, I happen to think, as the dominant reserve currency, and the Euros will never miss an opportunity to miss an opportunity, and you’d be mad to put your money in China because you might get arrested and never get it back, we actually have quite a lot of room to do this. I really think that it could be done.
“But you’ve got to deal with the folk models in people’s heads. And the vast majority of Americans do not think that running up an extra $15T in debt, just because there’s a virus that’s taking out 1 in a hundred people is a good idea. And if you do that, in the midterms, you’re going to pay an awful electoral price, even if it is the right thing to do.
“Interviewer: The epidemiologists, some of them in Biden’s administration, they’re essentially saying two months…
“Mark: They don’t know. They don’t know. Hold on. They don’t know. The thing about this pandemic is it shows you …my favorite line about science is from Dara Ó Briain: ‘Science doesn’t know everything, because if it did, it would stop.‘
“And it’s a very profound insight. And when you’re dealing with something new and novel like a Corona pandemic, which throws up a new variant, is it deadlier? you’re just constantly walking through a fog and you’re changing your mind because you got new information.
“Which, then, if you’re a politician, you get slammed on because you’re called inconsistent. Again, you can’t win. So the notion of ‘we know it’s going to be two months’: this is the stupidest, deadliest thing to say, because it might be six, in which case you now look like an eejit and what you promised you need to do for two months, you now need to do for six months, so now your credibility is shot.
“And what you see right across the world, irrespective of … this is happening in Denmark for Christ’s sake. They have a group of rioters called the “Men in Black”. This is the best welfare state and best-governed country in the world. And you’ve got people like ‘I am done with this lockdown bullshit.’
“So you’re losing public trust all over the world. And we’re operating at this level of ‘and the answer is you should run up $15T in debt.’ And I’m not even sure that’s the right answer. I’m not sure that’s even the problem that we face. I think we face a chronic problem of public confidence. And a chronic problem of the inability to do what it says on the tin. Which isn’t just a money problem.”
I’ve transcribed a good portion of it, but just listen to the end of the discussion from there. It’s stays quite interesting, with good points all around.