Repetir "1929" tal vez no sea suficiente para explicar la actual etapa del ciclo financiero global. Para algunos, como el autor de esta nota, el shock de la temprana década de 1930 fue la resultante de varias fases, con coordenadas geográficas distintas. Lo mismo podría estar ocurriendo hoy: la burbuja financiera es básicamente la misma, pero el "timing" podría ser distinto según estalle en los EEUU, Europa, Japón o China (o en todas partes al mismo tiempo). La instructiva nota que sigue es de Brendan Brown y apareció hoy en Zero Hedge:
Título: The
Depression Of 2019-2021?
Texto: The
profound question which transcends all this day-to-day market drama over the
holidays is the nature of the economic slowdown now occurring globally. This
slowdown can be seen both inside and outside the US. In reviewing the
laboratory of history — especially those experiments featuring severe asset
inflation, unaccompanied by high official estimates of consumer price inflation
— three possible “echoes” deserve attention in coming weeks and months.
(History echoes rather than repeats!)
Will We Learn
from History — And What Will Soon Be History?
The behavioral
finance theorists tell us that which echo sounds and which outcome occurs is
more obvious in hindsight than to anyone in real time. As Daniel Kahneman
writes (in Thinking Fast and Slow):
The core of
hindsight bias is that we believe we understand the past, which implies the
future should also be knowable; but in fact we understand the past less than we
believe we do – compelling narratives foster an illusion of inevitability; but
no such story can include the myriad of events that would have caused a
different outcome.
Whichever
historical echo turns out to be loudest as the Great Monetary Inflation of
2011-18 enters its late dangerous phase.
Whether we're looking at 1927-9, 1930-3, or 1937-8, the story will seem
obvious in retrospect, at least according to skilled narrators. There may be
competing narratives about these events — even decades into the future, just as
there still are today about each of the above mentioned episodes. Even today,
the Austrian School, the Keynesians, and the monetarists, all tell very
different historical narratives and the weight of evidence has not knocked out
any of these competitors in the popular imagination.
The Stories We
Tell Ourselves Are Important
And while on the
subject of behavioral finance’s perspectives on potential historical echoes and
actual market outcomes, we should consider Robert Shiller’s insights into
story-telling (in “Irrational Exuberance”):
Speculative
feedback loops that are in effect naturally occurring Ponzi schemes do arise
from time to time without the contrivance of a fraudulent manager. Even if
there is no manipulator fabricating false stories and deliberately deceiving
investors in the aggregate stock market, tales about the market are
everywhere….. The path of a naturally occurring Ponzi scheme – if we may call
speculative bubbles that – will be more irregular and less dramatic since there
is no direct manipulation but the path may sometimes resemble that of a Ponzi
scheme when it is supported by naturally occurring stories.
Bottom line:
great asset inflations (although the term "inflation" remains foreign
to Shiller!) are populated by “naturally occurring Ponzi schemes,” with the
most extreme and blatant including Dutch tulips, Tokyo golf clubs, Iceland
credits, and Bitcoins; the less extreme but much more economically important
episodes in recent history include financial equities in 2003-6 or the FANMGs
in 2015-18; and perhaps the biggest in this cycle could yet be private equity.
Echoes of Past
Crises
First, could
2019-21 feature a loud echo of 1926-8 (which in turn had echoes in 1987-9,
1998-9, and 2015-17)?
The
characteristic of 1926-8 was a “Fed put” in the midst of an incipient cool-down
of asset inflation (along with a growth cycle slowdown or even onset of mild
recession) which succeeds apparently in igniting a fresh economic rebound and
extension/intensification of asset inflation for a while longer (two years or
more). In mid-1927 New York Fed Governor Benjamin Strong administered his coup
de whiskey to the stock market (and to the German loan boom), notwithstanding
the protest of Reichsbank President Schacht).
The conditions
for such a Fed put to be successful include a still strong current of
speculative story telling (the narratives have not yet become tired or even
sick); the mal-investment and other forms of over-spending (including types of
consumption) must not be on such a huge scale as already going into reverse;
and the camouflage of leverage — so much a component of “natural Ponzi schemes”
— must not yet be broken. The magicians, otherwise called “financial engineers”
still hold power over market attention.
Most plausibly we
have passed the stage in this cycle where such a further kiss of life could be
given to asset inflation. And so we move on to the second possible echo: could
this be 1937-8?
There are some
similarities in background. Several years of massive QE under the Roosevelt
Administration (1934-6) (not called such and due ostensibly to the monetization
of massive gold inflows to the US) culminated in a stock market and commodity
market bubble in 1936, to which the Fed responded by effecting a tiny rise in
interest rates while clawing back QE. Under huge political pressure the Fed
reversed these measures in early 1937; a weakening stock market seems to
reverse. But then came the Crash of late Summer and early Autumn 1937 and the
confirmed onset of the Roosevelt recession (roughly mid-1937 to mid-1938). This
was even more severe than the 1929-30 downturn. But then there was a rapid
re-bound.
On further
consideration, there are grounds for skepticism about whether the 1937-8
episode will echo loudly in the near future.
In 1937 there had
been barely three years of economic expansion. Credit bubbles and investment
spending bubbles (mal-investment) were hardly to be seen. And the monetary
inflation in the US was independent and very different from monetary conditions
in Europe, where in fact the parallel economic downturn was very mild if even
present. And of course the re-bound had much to do with military re-armament.
It is troubling
that the third possible echo — that of the Great Depression of 1930-2 — could
be the most likely to occur.
The Great
Depression from a US perspective was two back-to-back recessions; first the
severe recession of autumn 1929 to mid-1931; and then the immediate onset of an
even more devastating downturn from summer 1931 to summer 1932 (then extended
by the huge uncertainty related to the incoming Roosevelt Administration and
its gold policy). It was the global credit meltdown — the unwinding of the
credit bubble of the 1920s most importantly as regards the giant lending boom
into Germany — which triggered that second recession and snuffed out a putative
recovery in mid-1931.
It is possible to
imagine such a two-stage process in the present instance.
Equity market
tumble accompanies a pull-back of consumer and investment spending in coming
quarters. The financial sector and credit quakes come later as collateral
values plummet and exposures come into view. In the early 1930s the epicentre
of the credit collapse was middle Europe (most of all Germany); today Europe would
also be central, but we should also factor in Asia (and of course China in
particular).
And there is much
scenario-building around the topics of ugly political and geo-political
developments that could add to the woes of the global downturn. Indeed profound
shock developments are well within the normal range of probabilistic vision in
the UK, France and Germany — a subject for another day. And such vision should
also encompass China.
