Today will be the last daily post for a little while. I will still continue to post, but irregularly from now on. It’s certainly not for lack of interest. I come to my computer each morning excited, and I hope this blog is as pleasurable to read as it is to write. I never expected anyone except my family to read this, so I’m grateful to all of you who do, and have sent messages or left comments.
But, I will soon start work as a financial journalist, and am worried about committing to writing an article a day here and at work. At least initially, while I settle into the new routine, I will post here less.
If you’re already subscribed nothing changes, you’ll still get an email whenever I post. If you have the blog bookmarked or just check it daily, I recommend subscribing so you get notified whenever I post. Once I start work, I’ll also share where you can find my work writing.
Thanks again for all the support. Stay tuned for what’s coming next!
Beeple, who you may remember from my earlier post, has just sold an artwork for $69.3 million dollars at auction. He is now one of the three most valuable living artists.
A massive congratulations to him. 5000+ days of work and dedication to his art has paid off in the best possible way.
Since the artwork is digital, the new owner has, in reality, bought a digital token (an NFT), encrypted on a blockchain. That token is what proves their ownership. Nothing can stop you, me, or your uncle Bob from printing it out, and hanging it in the salon (once you hang a painting, a lounge room becomes a salon). If the new owner does the same, there would be no way to tell their copy from uncle Bob’s – except for the digital token.
The sun sets in Montreal at 6pm, at which point it is already noon the next day in Auckland. When it falls below the horizon in Auckland, it has already been shining for 30 minutes in London. What unites New Zealand, Canada, the UK, and twelve other countries including Jamaica and Australia? Their shared head of state – Queen Elizabeth II. The sun still shines on the British empire.*
Not that there aren’t issues. In a recent interview with Oprah, Meghan and Harry accused the royal family of ignoring Meghan’s mental health crisis and being uncomfortable with the possibility that their child, Archie, could be a colour other than white. There have been fights over money, flower arrangements, and Prince Charles. Meghan and Harry now also keep rescue chickens.
I sympathize with any family going through hard times. But, I’d like to make them a cup of tea, not head of state.
The days of Australia as an English outpost in the Pacific are numbered. In the 2016 census, only 39% of people listed their ancestry as English, Irish or Scottish – a number set to decline given current immigration patterns. 29.7% of Australians were born overseas. While England is still the top country of birth, it says more about the past than the future. The median age of this group is 57; it’s 34 for those born in China or India. For the first time in 2019, there were more Australians born in Sri Lanka than Scotland.
The royals are increasingly irrelevant to our culture, our politics, and our future. They live thousands of kilometres away and offer no special benefit beyond the costumes. They epitomize a hierarchical, deferential culture at odds with Australian identity. Most of them would struggle to find honest employment were it not for the family business. There’s also the alleged sex offender.
All this is secondary to the main point. Anyone whose authority rests on their surname, and who their warboss-cum-king ancestor once extorted, should have no role, ceremonial or otherwise, in a modern democratic state.
But I digress.
To return to the question in the title, I have doubts about whether this drama will hasten the day Australia finally becomes a republic.
The problem is that these scandals replace the institution of royalty with a revolving cast of celebrities. We’re outraged at Charles or William not because they belong to 1000-year old hereditary clique that took power and land – the royals are the UK’s biggest land owners – at the point of a sword, but because they said something mean. Focusing on the individuals distracts from the institutions looming in the rear. The royals are increasingly just celebrities who live in the same house(s), a mix of Downton Abbey and Big Brother. And we know celebrity can be managed: an appropriate mea culpa; switch out the unpopular face (Charles) for the popular one (William); bundle the weird uncle into the closet; focus on the babies. All the while, what they actually are recedes into the background.
The irony of it all is that while defenders of the monarchy drone on about continuity, history, and culture, the royals are transforming themselves into celebrities who just happen to play dress up. All the worse for republicans everywhere.
*According to Wikipedia, similar honorifics were applied to the Persian and Roman empires. The Habsburgs, with their domains in Spain, Germany, Italy, and Latin America, were the first to phrase it in the now familiar way, but in Spanish – el imperio donde nunca se pone el sol.
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Government bond holders were the playground bullies of the 80s and 90s. They would threaten governments and central banks with bond sales to get what they wanted – usually fiscal discipline and lower inflation. Bond vigilantes – a self-appointed nickname – was presumably a way to sound more like Batman and less like thugs. Like everyone who picks their own nickname, they had high opinions of themselves:
“Bond Investors Are The Economy’s Bond Vigilantes.” I concluded: “So if the fiscal and monetary authorities won’t regulate the economy, the bond investors will. The economy will be run by vigilantes in the credit markets.”
These threats worked because selling government bonds causes their price to fall, and the yield – the interest rate – to rise. A government bond is just an IOU from the state, so higher interest rates make it more expensive for governments to borrow. Higher interest rates in government bond markets also usually increase interest rates elsewhere in the economy, slowing down growth. Governments, especially smaller, fiscally precarious ones, had reason to be afraid.
Their reputation was cemented when Bill Clinton’s campaign strategist James Carville said: “I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone.”
Quantitative easing mostly killed off the bond vigilantes. Central banks have bought trillions in government bonds since the GFC, making the threat of a bond vigilante sell-off mute. Sell all you want, the central bank will hoover it up.
Or did it? The deluge of fiscal and monetary stimulus, vaccines, and the beginnings of a recovery have some worried about inflation – a concern I’ve discussed previously. Bond holders hate inflation because it erodes the value of their (usually) fixed coupon payment. Because they hate inflation, bond holders tend to be wary of government spending. A world where governments are planning trillions of new spending has the vigilantes reaching their capes and masks. The FT reports:
There was an Anti-Vax march in Sydney over the weekend. A family friend on Facebook spoke at the rally and shared the video in a post:
Notice what he emphasizes: experimental vaccines, a rushed regulatory process.
Then, from a recording of his speech:
“I challenge Prime Minister Scott Morrison to prove to the world that I am – being over 70 – vulnerable. I’m not vulnerable! I look after myself!”
“Many of the people I talk to tell me I don’t believe in science. That is rubbish. I am an absolute stalwart for science. I love science. I just don’t love scientists. I trust science, I trust it, I just don’t trust many scientists.”
He never explains how he can trust science, but not those who produce it, nor where he finds all the science he allegedly loves. Someone in the crowd clarified matters by yelling “fuck science.”
It is easy to feel demoralized listening to him. Thousands of people in one of the wealthiest, most educated countries on earth came to hear him speak. To overturn two hundred years of medical research, he came armed with sayings from Mark Twain and Thomas Jefferson – presumably not realizing Jefferson was an untrustworthy scientist.
Yet, this man, a man with no interest in any science which contradicts him, still finds it necessary to speak the language of scientists; he might profane the vocabulary, but he uses it nonetheless. We are spared references to god, scriptural revelation, or prophecy, and get instead proof, process, and rushed experiments – regardless of how disingenuously they are meant. The Scientific Revolution has come so far that even its opponents are forced to use its vocabulary, and accept its process, even if only in lip service. Our species’ long battle against the forces of ignorance and darkness is far from over, but at least we have them playing by our rules.
Still, there is a legacy he shares with his pre-scientific forefathers: the absence of doubt. Where the greatest minds of the human race are unsure, this man is convicted. Convicted with the kind of arrogance only faith can provide.
If video is more your medium, Summers and Krugman have had a live debate on the issue:
The debate still hinges around three technical questions:
How large is the output gap? This is the gap between what an economy can theoretically produce, and what it is producing today. Think of the gap as representing idle factories or unemployed workers. The larger the gap, the more stimulus can be applied before you hit ‘supply limits,’ and cause inflation.
How effective will the stimulus be? Stimulus does not automatically create the demand which fills the output gap. Instead of buying a new TV, people might save the money they receive, or use it to pay down debts. Those who are concerned expect most of the stimulus to be spent, those who are more sanguine, the opposite.
How will inflation behave if it arrives? Both camps agree there is likely to be some inflation, but they disagree over how it will evolve. Those in favour of the stimulus as it stands expect inflation to steadily increase, perhaps even to 2% or 3%. They see this as a good thing, given inflation has been below target for almost a decade. There is little risk of it getting out of control because the Fed can always raise rates in the last instance.
Pessimists are concerned that if inflation starts growing, it could quickly get out of control. Instead of growing to 2% or 3% and stabilising, expectations might change, causing inflation to continue higher. If the Fed has to react by rapidly raising rates, it could have negative consequences for the financial sector and the wider economy.
This says nothing about the politics around the stimulus. Biden does not want to run the risk of delivering an underpowered stimulus as Obama did after the GFC.
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