It’s every generation throws a hero up the pop charts
Medicine is magical and magical is art
– Paul Simon, The Boy in the Bubble (1986)
They were still so young they hadn’t learned to count the odds and to sense they might owe the universe a tragedy.
― Norman Maclean, Young Men and Fire (1992)
If something cannot go on forever it will stop.
— Herb Stein (1986)
There is a theory that every major financial market crisis marks the end of one big thing, or the beginning of another big thing, or both, or neither. This theory, like most all-encompassing explanations of financial markets, owes much of its value to its carpet-bombing of the rhetorical landscape.
To this way of looking at financial things, while financial market crises are awful, they at least have a handy explanation … maybe. The crash of 1907? The end of laissez-faire; the return of central banks!1Which arguably led to crashes in 2000 and 2008 The crash of ’29? The end of a decade of leveraged, consumer excess2Leverage that was all back, plus plus plus, by 2008.; the return of probity via the separation of banks and brokers!3Yeah, that separation? Gone now. The Black Monday crash? The end of attempts to insure against financial losses in automated markets; the introduction of circuit-breakers4Most of which are entirely irrelevant now, given that arbitrary withdrawal of liquidity by algos makes market movements more capricious than ever. !
The list goes on and on, right up to the present, when markets are crashing once again. What big thing is ending? It’s almost too easy to say, but it seems it’s the end of integration. Free trade triumphalism had begun to fall apart a few years ago, and that trend has only accelerated since, a trend that will further accelerate, however briefly, as global supply chains become less integrated in the face of re-discovered risks.
What big thing is coming? Regionalism and fear of the other, one would think. Regionalism in everything, from financial markets, to supply chains, to … well, regions. Ever-tighter economic and social integration has turned out to be not such a great idea given our inability to deal with its economic and health consequences.
And more fear of the other? Well, that seems a given. I remember after 9/11 looking up and seeing commercial jets for the first time and feeling, not pleasure at a return to normalcy, but unease and a kind of epistemic collapse about airlines. They no longer represented what I thought they did.
It doesn’t take much imagination to see that people increasingly feel the same way about one another—as bipedal bags of hidden health hazards, rather than that guy from down the hall who sometimes coughs into his hand. This, of course, would have come as no surprise to, say, wealthy Venetians reversing a recent trend toward wider trade and hiding in their homes for months during the plague waves of 1629-1631.
The trouble with all these explanations, of course, is that everything in history, especially financial history, is overdetermined: there are many causes for every outcome, and we get far more causes than we do outcomes. Our main realization should be, and I’m merely echoing sociologist Charles Perrow here, is that financial markets crises are normal—in the sense that they happen all the time with the least provocation, not that they are in a way something we should feel good about, leave aside lessening the tragedy as each generation learns the same lesson.
Here is Perrow: “If interactive complexity and tight coupling—system characteristics—inevitably will produce an accident, I believe we are justified in calling it a normal accident, or a system accident.” What financial markets are very good at is exposing systems prone to systems accidents, especially financial systems themselves.
Whether anyone will learn that lesson, whether we will introduce more slack, less complexity and less integration into our lives is an open question, however. It will eventually stop, however, because it can’t not stop, amirite?
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