By Michael Every of Rabobank
“Continuous Partial Attention”
Recent events have again been so dramatic a Twitter intellect noted, “One day they will write a book about this.” I nodded, then realised of course they will write a book about it: it’s called history. Then I quickly remembered that nobody will read it, or learn anything from it regardless.
I’m not just talking about Sweden’s election seeing a party with Nazi roots surge, as Italian opinion polls point to a larger right shift. Rather, I have long held a Wittgensteinian view that as we progressed from daubing images on cave walls to become Renaissance “men of letters”, so our public ability to conceive of higher concepts did too; and as we regress back to emoticons, so our thinking will become more cave-man like. An article from Harrington (drawing on Garfinkle) agrees the internet-addicted public’s inability to do long-form reading is rewiring our biology and sociology. Skimming and clicking shift us from true cognition towards “continuous partial attention” – which sounds like almost everyone in markets. It also has broader consequences:
“If “deep reading” produced democracy as its governing political form, what can we expect to see associated with its networked digital successor? As Garfinkle sees it, this would probably be toward “a less abstract, re-personalized form of social and political authority concentrated in a ‘great’ authoritarian leader””.
Indeed, younger cohorts vote far less than their elders, and are consistently the least passionate believers in democracy and rights like freedom of speech because:
“Freedom of speech as an ideal was predicated on the scarcity of information; today, though, information is superabundant. And when you’ve grown up with personal experience of just how foul people can be online, you might well value the role of content moderators.
We can also kiss goodbye to the “marketplace of ideas”. This might have seemed plausible when everyone aspired to long-form, deliberative, rationalism and a broadly shared moral framework. When these are things of the past, we all absorb disaggregated, de-contextualised snippets of information at speed, our reading material rewards us for not concentrating long enough to think something through, and we can see everyone else thinking in real time on our screens?
In short, we are back with the ancient Greeks, whose elite *could* think and reason – about how democracy meant “the mob”, and the marketplace of ideas meant hemlock in the ear. However, our problem today is not just our swiping-does-note-denote-intelligence young: it’s our would-be-Greek elite too. They had all the benefits of a long-form reading upbringing, and yet have been consistently wrong on almost everything that actually matters. (Including, ironically, thinking smartphones for all were a good idea that would benefit society.)
In the nearly quarter century doing this kind of job I have suffered through ‘the Great and the Good’ patronisingly telling me: there was no US tech bubble; globalization would benefit everyone and make everyone act like us; China’s WTO entry would not impact the US and global economy; there were Iraqi WMD; there was no US housing bubble; there could be no Global Financial Crisis; everything would return to normal afterwards; the ECB would not do QE; QE would solve things; Brexit would not happen; Trump would not win; a trade war would not happen; Covid was not a pandemic; Covid would only impact global GDP slightly; we could not be locked down; Common Prosperity was regulatory reform; China did not have a property bubble; China’s property bubble was centred on Evergrande; China’s GDP growth would not slump; supply chains were not seeing a ‘bullwhip effect’; there was no looming food crisis; there was no risk of a European energy crisis; Russia would not invade Ukraine; Ukraine would collapse if it did; and inflation was “transitory” and interest rates would not rise.
What is most remarkable is some voices said nearly ALL of the above: yet being consistently wrong doesn’t seem to matter in terms of reputation in the “marketplace of ideas”. One starts to see why the ADHD young mostly switch off, or reach for the hemlock. If only more of the Great and the Good got the kind of public kicking Australian geopolitics expert Hugh White just did from former PM Rudd:
“White leans heavily into the winds of political exhaustion, reaction and anxiety fostered by this egregious policy overreach to now paint a simplistic picture of a more benign future under what he accepts as an inevitable Chinese “regional hegemony.” A skilled political operator, White adduces selective facts and little reason in reaching this conclusion, but happily smears as “unthinking” anyone who challenges his word as self-appointed prophet of both the anti-American far left and the “never upset Beijing” Rio Tinto far right.”
In the real world, Ukraine just routed Russian forces around Kharkhiv, echoing the humiliating retreat from Kyiv. At the least this makes it look like a two-way not a one-way war, and the spectrum of possible outcomes now widens to include far better – and worse. The meeting between Putin and Xi this week, the latter’s first trip abroad for around 3 years, will be interesting for followers of geopolitics; less political markets may see Ukraine’s gains as bearish for commodities and bullish for risk. However, if Putin feels his back is against the wall, who knows how far he will escalate to deescalate? He is already destroying critical infrastructure in Kharkhiv.
Indeed, hold any European triumphalism, because elections in Sweden and Italy both come well before we see the real pain from the energy debacle flowing through the European economy. Belgian’s PM just openly warned, “A few weeks like this and the European economy will just go into a full stop. The risk of that is de-industrialization and severe risk of fundamental social unrest.” Sadly, he is not exaggerating. No affordable power, no industry; then a fight to carve up EU supply chains – and as Poland increases military spending from 2.2% of GDP in 2022 to 4.2% in 2023. Worse, there won’t be any affordable power for YEARS even if we start now. There is still no pan-EU plan to cap energy prices, or to ration demand – but there is a G7 proposal to cap Russian energy export prices and sanction anyone who does not comply. And despite this historically bad backdrop, there is still no official forecast of a European recession!
Markets rallied hard on Friday, stocks up, and key US bond yields down before closing unchanged, ignoring clear messages from both the Fed and the ECB that more large rate hikes are coming again, soon, and any large rate cuts are not. Is the mob wrong, or are the elite in central banks? I posit both are. The mob can see some of the economic devastation looming the elite can’t or won’t: yet it is going risk on, rather than only into bonds, in a spoiled-child, id-addled tantrum. Moreover, the mob overlooks that the elite have to raise rates to try to preserve even part of the system they have built for themselves in the face of geopolitical rivals: rates up, global commodities down – and commodity-backed new-world orders down with them. Different fingers on different buttons from those in Ukraine, but all the same economic war. (As the US rushes for an 18-month finish(!) for its new IPEF anti-China trade deal – but India plays hard to get.)
Relatedly, Bloomberg reports the co-authors of the “Bretton Woods 3” thesis are now split: one says the global dollar is done, the other that there is no alternative, while agreeing the dollar is likely to have peaked. If you are capable of (moderately) long-form reading, look back at what I wrote months ago to debunk both arguments, concluding: 1) there is no global alternative to the dollar; and 2) it will continue to rise, structurally and cyclically, even if there is room for profit-taking – just look at Europe, Japan, China, or Russia as the alternatives.
I now leave you to your “continuous partial attention”, and/or being wrong.