Wall Street reconvened last week. Investment advisors, economists and soothsayers have given us their guesses and wishful thinking about where the world is headed in 2015. Most see ‘more of the same’ coming. They’re buying the dips whenever they see them. They’re long stocks and waiting for corporate boards to approve more buy-backs. They’re sure that if anything goes wrong, Janet Yellen has their backs; she’ll come to the rescue if prices start to fall in a serious way.
And they’re probably right. ‘More of the same’ is what we usually get. But not always.
Last week, we were exploring ‘solutions’. Frequently we comment on the Fed’s bubbles, and the inevitability that they will pop and cause widespread misery. Some readers think it mean-spirited of us not to offer a solution that will avoid the suffering. Some even think we are looking forward to a catastrophe just so we can say, ‘I told you so.’ An explanation is needed.
Right before Christmas, we spent some time in Washington, DC, renewing our ties to the activist community. We attended a meeting of conservatives, for example, some of whom we had known 30 years ago, as director of the National Taxpayers Union.
We were called upon to explain ourselves. Why had we forsaken the public interest sector? What were we up to now?
We demurred. We didn’t have the heart to tell them how we had been won over to Marx’s viewpoint. Karl Marx’s had plenty of bad ideas, but he had at least one good one; historical determinism:
‘It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness. At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or — what is but a legal expression for the same thing — with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into fetters. Then begins an epoch of social revolution.’
Pierre-Simon Laplace put it better:
‘We ought to regard the present state of the universe as the effect of its antecedent state and as the cause of the state that is to follow. An intelligence knowing all the forces acting in nature at a given instant, as well as the momentary positions of all things in the universe, would be able to comprehend in one single formula the motions of the largest bodies as well as the lightest atoms in the world, provided that its intellect were sufficiently powerful to subject all data to analysis; to it nothing would be uncertain, the future as well as the past would be present to its eyes. The perfection that the human mind has been able to give to astronomy affords but a feeble outline of such an intelligence.’
And we put it best of all:
People come to think what they must think when they must think it.
This is another way of saying that the future is ‘path dependent’. Where you go depends on what road you’re on. 2015 depends on 2014, which depended on 2013. And so on. If the Federal Reserve had not made so much credit available last year, there wouldn’t be so much debt hanging over the market today. And a debt crisis, sometime in the future, wouldn’t be needed to get rid of it.
That’s also part of the reason you hear so little about ‘solutions’ in these pages. There aren’t any. The path goes where it goes, all the way to the end. You borrow money; you have to pay it back. Or, something bad happens. A year passes; you are a year older. There is no solution.
Is that negative? Nope. It’s just the way it is.
But wait. There’s more to the story. A lot more. Because we humans never know exactly what road we’re on. Or where it leads. But, as Marx pointed out, the road itself changes the way we think. Usually, we will want to go to the end of it, even when we know it leads to disaster.
So what if we see the road washed out ahead…so what if we know we’re on a bus headed for the cliff…maybe we’re better off not knowing?
For Markets and Money