Jeremy Grantham Nails the Zeitgeist, or
“The New Abnormal”
The economic environment seems to be stuck in a rather unpleasant perpetual loop. Greece is always about to default; the latest bailout is always about to save the day and yet never seems to; China is always about to collapse but instead teases us by inching down; and I swear the Financial Times is beginning to recycle its reports! In the U.S., the fiscal cliff looms along with debt limits and the usual election uncertainties. The dysfunctional U.S. Congress continues for the time being in its intractable ways. The stock market rises and falls and rises and falls again. It is getting difficult to find anything new to say at client meetings. I, for one, wish that the world would get on with whatever is coming next.
–Jeremy Grantham, “Welcome to Dystopia“; GMO Quarterly Letter (July, 2012)
The majority of investor Jeremy Grantham’s latest newsletter is devoted (again) to resource scarcity, and the seismic threats posed by same.
However, it is his concluding remarks (excerpted above) that perfectly capture today’s zeitgeist.
Cue George Carlin
Of course, in the really big picture, it’s George Carlin’s “vuja de” that best captures today’s mindset.
As Carlin defines it, vuja de “is the strange feeling that somehow, this has never happened before. And then it’s gone.”
The last time there was a truly global financial bust, The Great Depression, financial policymakers’ response was to essentially watch from the sidelines.
This time around, central banks and monetary authorities not only are all over the playing field (so to speak), they’re taken over the role of the umpires, fans, and cleaning crew, too.
Translation: instead of forcing mass write-down’s, bankruptcies, etc., they’ve been adding liquidity to the system and devising ad hoc interventions (QE I, QE II, Operation Twist) so as to preclude those things.
Call it the Japanese approach on steroids.
So far, at least, it hasn’t worked, which brings us to where we — you, me, and Jeremy Grantham — are today: a stagnant, seemingly perpetual loop of financial crisis and postponement.
Call it, “The New Abnormal.”