by
Mervyn King
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[...] Prices and wages do not adjust instantaneously to clear markets whenever demand and supply are out of balance. Firms change price only irregularly in response to changes in demand; wages adjust only slowly as labour market conditions alter; and expectations are updated only slowly as new information is received. Such 'frictions' or 'rigidities' introduce time lags into the process by which changes in money lead to changes in prices. These lags in the adjustment of prices and wages to changes in demand--so-called 'nominal rigidities'--and lags in the adjustment of expectations to changes in inflation--'expectational rigidities'--generate short-run relationships between money, activity, and inflation. [...]
the folly of viewing economics as this continuous and inherently quantifiable thing (think GDP, supply and demand theory, inflation) when it is anything but, and the choice of what to measure is so incredibly qualitative (is that the right word? political?)
[...] But if the assets have genuinely lost value, then the central bank must be careful not to subsidise insolvent undertakings. [...]
this is almost a bromide but really, why does it matter if no one ever finds out? it's all built on trust anyway
(on lenders of last resort)
[...] For a society to base its financial system on alchemy is a poor advertisement for its rationality. The key to ending the alchemy is to ensure that the risks involved in money and banking are correctly identified and borne by those who enjoy the benefits from our financial system.
I think when I first read this I thought it was great and super radical, but now it just feels meaningless ... how could anyone possibly "correctly" bear the risks? you just have to reduce the possibility of gaining benefits
[...] The pretence that the illiquid real assets of an economy--the factories, capital equipment, houses and offices--can suddenly be converted into money or liquidity is the essence of the alchemy of the present system. Banks and other financial intermediaries will always try to finance illiquid assets by issuing liquid liabilities because they make profits by paying less on the latter than they earn on the former. [...]
there's a great line in a different book (forget which, maybe Yaroufakis) about banks wanting true, instant liquidity ... and yet in reality they have to cope with the short-term/long-term disparity between lending/borrowing maturation rates (I forget the term for this)
[...] each type of asset is given a risk weight, agreed by international regulators, and this is used to calculate the overall amount of equity a bank must issue. Mortgage lending, for example, was thought on the basis of past experience to be relatively safe, and was given a low risk weight. Sovereign debt was believed to be so safe that it was given a zero risk weight, meaning that banks did not have to raise any equity finance in respect of such investments and so had no additional capacity to absorb losses on them. [...]
again, this all stems from the truly stupid idea that this shit is rigorously quantifiable and not just make-believe
[...] Someone buying a meal in a restaurant might use a card, as now, but the result would not be a transfer from their bank account to that of the restaurant; instead there would be a sale of shares from the diner's portfolio and the acquisition of different shares, or other assets, to the same value by the restaurant. [...] There would be no unique role for something called money in order to buy 'stuff'.
this passage kinda boggles the mind (I say so now, but I think I felt similarly when I first read this) cus how can you imagine such a strange concept (which is really functionally equivalent) but not then take the next step of asking why such a transfer is needed at all???? it's still money??? like that startup that tried to get people to do favours for each other in exchange for virtual currency (which they called karma I believe). why is it necessary to transfer wealth in order to support production or consumption??? DRIFT i'm telling you
[...] If the government boosts spending to bring unemployment below its natural rate, then the increased demand for labour will push wages up. But to restore firms' profits, prices will also rise, and real wages will fall back to their original level. [...]
my original notes are "unless you also change policy to discourage profit-seeking ... this has real implications for the minimum wage debate" which, tbh, feels surprisingly woke for the me of 2016
[...] One is convinced that the market will rise; the other that it will fall [...] The first person is so convinced that the markets will rise that he bets $1 million that it will be higher a year from now. Sure that he will be much richer in a year's time, he starts to spend now. The second person [...] also starts to spend now. The bookmaker covers his bets.
[...] Financial markets thrive on differences of opinion--they make the horse race. They also create 'mistakes' in perceptions of wealth or spending power. [...]
my margin notes: "the money shot" which I assume refers to me feeling vindicated about my own theories on financialisation (great)
[...] debt was a consequence, not a cause of the problems that led to the crisis. Debt did not descend like manna from the heavens but was a conscious response by borrowers to the situation they faced. [...]
I mean if you want to take a more Marxist approach, debt was a result of rentiers (wages being suppressed, housing being too expensive, etc)
It's tempting to read this moment of disappointment, this moment when worship fails and transcendence collapses back into distraction, as cause for either condemnation or vindication. As grounds for condemnation, the moment of disappointment can be taken as more good evidence that the religious project is pointless. Worship doesn't work. It never has before and now, despite whatever local heights you may have reached, it has definitely failed again. But the opposite verdict is also possible. This disappointment can be read as a vindication of religion, as good evidence that worshiping anything other than the one true God will cannibalize you every time. You weren't wrong to worship, you just aimed at the wrong thing. Pick the right thing next time. The failure of a false god vindicates your hunger for the true one.
This polemic can go either way but, in the end, both readings seem thin. They both think worship is about finding an object that won't disappoint. And as polemic, they both miss something vital about the character of this disappointment, about the curvature of the arc that worship describes. Cribbing from David Foster Wallace, this book argues for a third reading. This third way doesn't see the moment of disappointment as a failure of religion or as a failure to be religious. Rather, it reads the moment of disappointment as pivotal to the character of worship. It reads this failure of transcendence as a feature (not a bug) of religion itself. In fact, it holds that one main goal of religion is to induce this disappointment.
This third reading offers a contemporary version of a very old religious idea. This old idea has the shape of a paradox: to save God you must lose God. This idea claims that there is a moment of inversion at the heart of worship, a twist in the loop of transcenderce that renders it, Möbius-like, continuous with immanence. This twist joins both sides—transcendence and immanence—as a single surface. If, with dogged persistence, you rise along the the line of transcendence you will reach a point of inversion in your ascent that will, without ceremony or explanation, return you to immanence. This homecoming will hurt a bit. It will feel like failure. It will disappoint.
[...] This sadness [...] threatens to obscure the urgent revelation at the heart of your loss: the revelation that the end of worship was, all along, immanence and that, though your head may invent a thousand ways of escaping this world, the point of religion is to return you to it.
There are two elements at play in worship: the aiming at the aimed at. The aiming itself is hungry but unstable. The aimed at is nameable but evasive. Invested by your aiming with the hope of satisfaction, with the hope of escape and transcendence, the aimed at becomes an idol. [...]
But, again, your idol can't meet this expectation. No idol can. The hope that it could is a mirage. And when that idol fails--when it disappoints your aiming and shows itself without transcendence: immanent, disheveled, disenchanted--there will be a moment, perhaps quite brief, when all that remains of worship is a pang of raw aiming. This moment when it looks like your worship has failed is the religious moment. This is the revelation. This moment allows the aiming itself to appear. And it is in the aiming itself, not in the object aimed at, that God is most clearly manifest. This is the epiphany. [...]
the quote comprises most of the chapter tbh but i thought it was really really good, even if we clearly have different conceptions of what "God" means