April 25th & 26th
287 Kent Ave, Brooklyn, NY 11211
Abstract Submission Deadline: January 19th
What does it mean that digital technologies are increasingly a part of...
Krugman parses Larry Summers recent IMF talk, and finds at the core the hard paradoxes of the postnormal: Secular Stagnation, where the liquidity trap inverts the order of the economic universe.
If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.
Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”
He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.
Amazing stuff – and if we really are looking at secular stagnation, he’s right.
Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.
One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go theKrugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.
Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!
But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.
Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.
I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.
A comment I made that actually got applause during an open and free-wheeling session at IBM’s Cloud Forum, today.
Because of the increasing pace of business today, the only sensible strategy is to become more risk tolerant, but companies are not in general adopting that mindset. Things are moving faster but business leaders are not moving to reduce the friction in their business to keep pace.
The average company lifetime was 75 years 50 years ago, and today it is fifteen. I bet that in five it will be down to ten, and that’s because management still thinks it’s smarter to operate with a foot on the brake instead of on the accelerator. It seems that should be true, it’s intuitive, but it isn’t anymore.
We’ve moved into a new economy where the fundamental rules have changed, and the operating premises the past are not only broken, but dangerous.
Heitor Alvelos is a conceptual artist in Portugal who concocted Antifluffy as a project for Future Places, a digital media festival in Porto, Portugal.
Interview with Antifluffy by Sara Moreira
Global Voices (GV): Who are you, Antifluffy?
Antifluffy (AF): I am a mascot of a media lab in Porto. I am an icon, because I have an image and a catchy name. And I am an idea about how the world can be better a place.
GV: Do you mean the real world or the digital world?
AF: As Antifluffy I don’t really make a distinction, it’s all connected. Essentially what I try to convey is the thought that there is nothing really fundamentally different from new media if we don’t consider its repercussions on the existential level. There is a kind of underlying determinism about media – and even what people call post-media – that is this road to go towards the future without actually considering what it is doing to us and what kind of choices we really have.'Obliquity - the capacity that every human being has, intrinsically, to think outside-the-box, to innovate, to not just go with the flow, to not just let themselves be seduced by the mirror of everyday gadgets'
GV: Do you choose to be on social media?
AF: Yes, of course, I should say that I have many Facebook accounts and many Twitter accounts in the sense that being an idea, I am essentially something that is in everyone’s brains. Antifluffy is a way of describing a quality that every human being has that is called obliquity. It’s the capacity that every human being has, intrinsically, to think outside-the-box, to innovate, to not just go with the flow, to not just let themselves be seduced by the mirror of everyday gadgets right away.
Ultimately Antifluffy is the belief that people can get a better deal out of what media is offering them. One thing that strikes me is to realize that we all have incredibly powerful tools at our disposal right now and yet it seems that rather than working in our favor they are acting against us, making us more anxious, more deterministic, more alienated.
Where is the healing aspect of new media? I haven’t quite figured it out yet and I think we have a duty to find it and nurture it. Of course I am making a huge generalization, there are people doing something fundamentally right, but they are the exception rather than the rule…
GV: Who is the “We” of the “We are the fluff” performance that has just happened
AF: When I say “we” I mean ‘We human beings’, ‘We creatures that happen to be alive in this moment’. I am an invitation for people to develop the obliquity they have within themselves. To reconsider the parameters of their connection with contemporary culture…
Antifluffy was partially inspired by a TV commercial for a mobile phone company that in my opinion represents a syndrome. The ad shows an abridged story of the 20th century, including among other things, historical footage of soldiers on the battlefield. The fact that a mobile company uses images of human beings that very likely didn’t make it back home, and then says that the solution is to change your contract for a better deal, 4 cents a minute, is somehow going to do what? In terms of historical heritage, in terms of what our ancestors deserve?
Fluff is the kind of crap that says history can and should be revisited as a mechanism… for what? For fluff! It’s just stuff!
GV: Earlier today I saw a crowd on the street led by an orchestra. What initially looked like a spontaneous musical performance was actually a sponsored (and filmed) event with the logo of a mobile company everywhere…
AF: I am not against the fact that there are companies providing access to culture. I think that is absolutely fine, but what it seems to me right now is that it has all become a bit of a minefield. It used to be – or at least it seemed to be – easier to read the cultural and the social landscape, and at the moment it has all become very ambivalent. With those kind of experiences. You know, one little detail can suddenly shift the whole experience into a different territory, from the cultural to the commercial in this case. Not to say that bridges cannot be built, of course they can, but at what price?
GV: Would it be easier to get more people out to the streets in Porto every time there is an anti-austerity demonstration if the call for protest was sponsored by a brand?
AF: The 15th of September, 2012, was a key moment to the understanding of what is going on socially in Portugal. On that day we had what a lot people say it was the biggest demonstration since the revolution of 1974. Avenida dos Aliados [Porto’s main avenue, where the City Council is] was filled with hundreds of thousands of people protesting because the government was going to propose a nasty kind of tax. And the strange thing is that a mobile phone company was organizing an outdoor rave party that night.
Usually in my presentations I show two slides: one with the crowd filling out the Avenida dos Aliados at 3pm, and the next slide is the same crowd at Praça Filipa de Lencastre at 1am having beer and listening to some DJ. So what you are describing is actually what we already have. I am sure there was a connection between these two events that was planned.
But my concern is exactly this… what’s the word, it’s not polarization, but schizophrenia. Is this kind of schizophrenia in which you are either on party mode or on protest mode, and I don’t think this is healthy. It’s actually very damaging to our integrity as individuals.
It worries me that I don’t see that many people proposing new social geometries. The only time when people all come together is to say NO. But what I never see is that same huge group of people proclaiming an alternative together as a whole.
GV: Do you think that digital media can help bring people together to accomplish alternatives?
AF: I think the first condition for us to get out of this nasty situation is to rearrange the ways in which we connect… I mean how can we be healthy as individuals and as citizens if we keep being bombarded by all of these messages and images of a catastrophe and at the same time we get all this stuff which is all saying ‘Hey it’s all great and fine and fun’ you know? There has got to be a middle way, there must be a way to harmonize these two schizophrenic moments. We are hostages of this polarization and being bombarded with the idea that it is all going down hill and then up the next minute. After the TV presenter reads all the tragic news – let’s have a commercial break, and it’s all about fluff, and love and iPads, and it’s not healthy to listen to these messages.
GV: Are you fighting against these kind of alienating messages?
AF: Despite the ‘anti’ in my name, I like to think of Antifluffy more as an invitation first of all, to optimism. You know there are things that will never be taken from us, and one of them is affection. Let’s be generous with one another, let’s value one another, let’s not be afraid to say it. It’s about optimism, it’s about connecting, and it’s also about not insulting people’s intelligence. Antifluffy is a way of saying that some things take time to unravel, to be understood, they are complex. Let’s take it easy, it’s alright, you don’t have to understand everything right away, as opposed to the vertigo that is happening on social media and in old media.
I looked up obliquity and Mirriam-Webster defines it this way:
1: deviation from moral rectitude or sound thinking
2 a : deviation from parallelism or perpendicularity; also : the amount of such deviation
b : the angle between the planes of the earth’s equator and orbit having a value of about 23°27′ <obliquity of the ecliptic>
3 a : indirectness or deliberate obscurity of speech or conduct
b : an obscure or confusing statement
May be defined differently in Portuguese, after all. But I like Antifluffy’s reapplication, as deviation from groupthink, or the possibilities of breaking out from our cultural blinders. Antifluffy might have borrowed this from economist John Kay’s book, Obliquity, which I stumbled upon just now, through a Google search on the term, and which I am going to read as soon as possible.
Eduardo Porter, Perils in Philosophy for Austerity in the U.S.
A lot of folks were predicting a big surge in corporate mergers and acquisitions, but the rate has actually fallen by 3.4% since last year. Why?
Andrew Ross Sorkin, Frenzy of Deals, Once Expected, Seems to Fizzle - NYTimes.com
[…] deal-making may not be coming back anytime soon.
“It’s pretty grim, even with Verizon-Vodafone padding the numbers,” said Scott A. Barshay, the head of the corporate department at the law firm Cravath, Swaine & Moore, referring to Verizon’s recent $130 billion deal to buy out Vodafone’s share of the joint venture in Verizon Wireless. If you exclude that deal from the count measured by total dollars, we’ve returned to 2009.
“There has not been confidence in the strength of the recovery since the financial crisis, which makes C.E.O.’s and boards reticent to pursue major transactions,” he said.
Some blame the debt ceiling fights in Washington, the government shutdown or the introduction of Obamacare for creating uncertainty in the economy and thus the slowdown in deal-making.
“It reflects the broad-based loss of confidence in the business community and their inability to make significant capital investment, be it M.&A. or capital spending, in large measure because of the uncertainty of tax and regulatory policy from Washington, D.C.,” said Doug Kass, founder of Seabreeze Partners Management. “Until Washington, D.C., grows more proactive, less inert in policy, this is likely to continue.”
But that may only be part of it.
What if the slowdown in merger activity isn’t cyclical, but secular? What if corporations have learned the lessons of so many companies before them that the odds of a successful merger are no better than 50-50 and probably less? Is it possible that the biggest deals have already been done?
What if these two views — uncertainty about tax policies and the uncertainty about whether 1 + 1 is really going to be more than 2 — are just two aspects of a more general increase in uncertainty and ambiguity? In an economy that has grown to be so complex and where markets are so volatile predictions of risks and rewards are growing to be increasingly difficult.
In the background, we have the paradox where slowing growth rates — caused by governments and corporations cutting back on expenditures — cannot be countered by lowering interest rates because central bank interest rates are at zero already. This leads to even slower or negative growth, which increases uncertainty, lowers investments and dealmaking, lowers tax collection, and which leads to growth slowing even more.
We lack the political will in Washington and other capitals to spend more money to get things rolling, and corporations are unwilling to invest because they don’t know if it will lead to a productive return. So all those corporate profits are mounting, and not being used for new investments. Instead, investors are calling for stock buybacks, to transfer the cash from corporations to investors. But neither know what to do with the money, and neither do our political leaders.
The postnormal economy is likely to be here for a long while.
Drone pilots get post-traumatic stress disorder. So give them an Siri-like copilot to blame the killings on.
William McKnight, president 3M, 1948
The McKnight Principles are astonishingly contemporary, embodying the laissez-faire principles that animate the cooperative, fast-and-loose organization that I believe will dominate in the postnormal future.
As I wrote the other day,
The coming cooperative organization is scary, because it places ambiguity and uncertainty at the center of organization dynamics. It is based on not knowing exactly what to do, in a world increasingly difficult to read. It values experimentation over execution, places agility above process, and puts learning ahead of knowing. It asks more questions than it can answer, and it may not even know how to answer them.
Issa Kalantari, Iran’s former agriculture minister, July 9 2013, as cited by Tom Friedman in the NY Times
The world is unprepared for a few billion ecological refugees.
Welcome to the postnormal.
Twitter / RonCharles: ”This Northrop Grumman ad on the Metro totally convinced me I need to get a drone.”
Bruce Sterling, Atemporality for the Creative Artist