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Avoiding GOM status
Aug. 15th, 2010 04:53 pmI haven't blogged so far this weekend because I wanted to resist heading blindly into a "what is the world coming to?" rant. This reached its peak this morning when Imogen Stubbs (married to Trevor Nunn) told of how she had to stop "helping" her daughter with her English A level studies because these days any sign of imagination on the part of A Level examinees is frowned upon.
The whole article is on the front page of the Sunday Times News Review, so anyone too mean to pay a couple of quid won't be able to read it. I will, however, give you one quote of justification for this madness, from an English teacher:
Or, translated into English, useless pupils benefit from the current regime because it makes them feel good about themselves.
One is irresistibly reminded of the science fiction story where talented ballet dancers had to wear weights when performing, and talented singers were stopped from singing, because this made everyone more equal.
Trevor Nunn took a paper on Hamlet under examination conditions, as did Adam Long, co-founder of the Reduced Shakespeare Company. Nunn got a "mid-B". Imagination, apparently, is a handicap when doing English A Level. Throw in talent and flair, and you are doomed.
Many pupils who did well confessed to not even reading the whole text. Instead they read revision books and web sites on how to give the right answers. "This is the conventional view of (insert set text here) and this is how you should answer the following categories of questions...."
Trevor Nunn clearly did not answer the question "Hamlet avenges his mother rather than his father: how far and in what ways do you agree?"
I suspect that the answer, "No distance at all: none", would not get you an A* grade.
There's a Radio Four programme on this tomorrow (Monday) morning at 11am. I really do hope that they broadcast more of this tosh from the teacher who wants to make the useless pupils feel good about themselves. "Yes, you followed the assessment objectives! Well done! You really understand Hamlet!" Wouldn't it be better to make pupils only feel confident with justification? Otherwise, they are going to be in for a horrible shock when they encounter the real world.
+++++++++++++
The world is heading back into one of its phases of false optimism, backed by most of the columnists in the FT and the Sunday Times, as far as I can see. This is despite the US accepting that it's going to have to launch a non-boat QE2, and the Governor of the Bank of England is trying to explain how things are fine, even though we currently have negative real interest rates (-2.5%) and we haven't even yet seen the impact of the cutbacks to come.
And, most worryingly, we have the scenario that many of us could have predicted, but none of us really wanted -- that being that Germany is exporting its way out of trouble; the German consumer is not consuming any more, and the structural imbalances of the global economy are getting worse rather than better. Meanwhile, no-one mentions the Chinese housing market, or indeed the Chinese bubble, at all.
I think that part of the reason for this is that we are, quite simply, in completely unknown territory. Economists attempt, like chartists, to throw a map of events from the past (1930s, early 1970s Japan in the early 1990s) onto the current scenario and work from there. But, clearly, we are in a very different world today. It's far more interlinked, and there are two significant players (China, India) who didn't really count even as recently as 1991. If you take the "it could fall either way" line, and add to that a large number of variables, many of which we can't measure accurately and, even if we could, of which we wouldn't really understand the relative importance even if we could measure them accurately, then you can see why we are in a classic scenario of no economist in the world being clear in their own mind about how it's all going to pan out.
Perhaps one helpful methodology would be to see how things are different.
Working against the 1970s stagflation theory is, I think, one powerful force -- the labour market is much less unionised. Labour, as it were, has lots much of its pricing power.
Also working against that theory for the moment is that quantitative easing is not having a noticeable effect on M4 -- a broad money measure that no-one has taken much notice of for years. At the moment it's expanding in the US and UK by about 3%. I have long held a theory that the great flaw in Friendmanesque monetarism was that restricting M0 was pointless because it had no impact on the "real" volatility or supply of money. Now it appears that the opposite is, at least in the short term, also the case. You can send M0, M1 and possibly even M2 (if I could remember what it was) through the roof, without making a blind bit of difference to the supply of money that matters.
The reason, as I wrote before, is that people are taking all of this money and (like me) are paying down debt with it. This might not be the best 10-year move, but it sure as hell is the best two-year move, and that seems to be the general maximum personal spending time horizon. If it makes P Birks Inc short of capital three years down the line, then, well, I've shown that my credit is good, and I'll probably be able to borrow it back.
Low interest rates, in this sense, aren't stimulating the economy at all. There's nowhere to put my money efficiently, except to pay down my old fixed-rate debt. The increase in the proportion of fixed rates and inflation-index deposits/borrowing have served to decrease the impact of pumping money into the economy. (I'll admit that there's a slight hole in this argument in that variable rates are themseloves something of a newcomer to finance -- so cutting rates and pumping money into the economy in the 1930s should have had a similar "pay down debt" effect. But it didn't. I'll have to have a think about that one.)
Working against the 1930s Keynesian stimulus is, I think, a lack of government "slack". basically the opportunity for the government to spend masses of money to stimulate the economy (at least in the UK) is busted by (a) the danger of the UK losing its AAA rating if it borrows any more so to do and (b) half of the country has become an effective state economy already. Northern Ireland and many parts of the north-east of England have been kept from becoming ghost towns or lands of anarchy only by decades of the state pumping in money. Thirty years of Keynesian stimulus has merely kept the status quo.
What works against the 1990s Japan argument? Well, the most important, I think, is that Japan's "fight" against deflation was nothing but. While the Japanese Treasury was doing one thing, the Bank of Japan was doing another. Every time one side pushed the expansionary button, the other choked off the recovery.
In other words, if we carry on with the current stimulus without the ECB choking off the recovery at the pass, we're going to head into a very strange situation indeed. The macro-economics of it in Europe would appear to back the Aardvark argument. If Germany manages a massive expansion (because Greece and Spain are so weak that the euro stays soft, thus helping German exports to the US, Japan, and China) while Spain stays stagnant and greece contracts, it really gets harder to see the euro surviving more than five years. The worry is (see above) that the ECB will "solve" this problem (the threat of the eurozone disintegrating) by choking off German expansion rather than encouraging Greece and Spain to get their act together.
The current situation looks likely to me to lead to some kind of odd "permanent crisis", with tactical moves being made every year to attempt to solve the latest mess. This situation could, I suppose, last a long time. No grand vision, but lots of white-coated little men with little imagination running around trying to stop the latest leak in the dyke. While that isn't an ideal scenario, I suppose that, if it stops the dyke collapsing until after I am dead, it is at least the best that I can hope for.
+++++++++++
The whole article is on the front page of the Sunday Times News Review, so anyone too mean to pay a couple of quid won't be able to read it. I will, however, give you one quote of justification for this madness, from an English teacher:
"I think the danger of being the slightly eccentric teacher full of flair is that you don't cater to all the pupils in the class. There are pupils with flair, but there are other pupils. And they greatly benefit from the asssessment objectives because they are signposts that give them confidence".
Or, translated into English, useless pupils benefit from the current regime because it makes them feel good about themselves.
One is irresistibly reminded of the science fiction story where talented ballet dancers had to wear weights when performing, and talented singers were stopped from singing, because this made everyone more equal.
Trevor Nunn took a paper on Hamlet under examination conditions, as did Adam Long, co-founder of the Reduced Shakespeare Company. Nunn got a "mid-B". Imagination, apparently, is a handicap when doing English A Level. Throw in talent and flair, and you are doomed.
Many pupils who did well confessed to not even reading the whole text. Instead they read revision books and web sites on how to give the right answers. "This is the conventional view of (insert set text here) and this is how you should answer the following categories of questions...."
Trevor Nunn clearly did not answer the question "Hamlet avenges his mother rather than his father: how far and in what ways do you agree?"
I suspect that the answer, "No distance at all: none", would not get you an A* grade.
There's a Radio Four programme on this tomorrow (Monday) morning at 11am. I really do hope that they broadcast more of this tosh from the teacher who wants to make the useless pupils feel good about themselves. "Yes, you followed the assessment objectives! Well done! You really understand Hamlet!" Wouldn't it be better to make pupils only feel confident with justification? Otherwise, they are going to be in for a horrible shock when they encounter the real world.
+++++++++++++
The world is heading back into one of its phases of false optimism, backed by most of the columnists in the FT and the Sunday Times, as far as I can see. This is despite the US accepting that it's going to have to launch a non-boat QE2, and the Governor of the Bank of England is trying to explain how things are fine, even though we currently have negative real interest rates (-2.5%) and we haven't even yet seen the impact of the cutbacks to come.
And, most worryingly, we have the scenario that many of us could have predicted, but none of us really wanted -- that being that Germany is exporting its way out of trouble; the German consumer is not consuming any more, and the structural imbalances of the global economy are getting worse rather than better. Meanwhile, no-one mentions the Chinese housing market, or indeed the Chinese bubble, at all.
I think that part of the reason for this is that we are, quite simply, in completely unknown territory. Economists attempt, like chartists, to throw a map of events from the past (1930s, early 1970s Japan in the early 1990s) onto the current scenario and work from there. But, clearly, we are in a very different world today. It's far more interlinked, and there are two significant players (China, India) who didn't really count even as recently as 1991. If you take the "it could fall either way" line, and add to that a large number of variables, many of which we can't measure accurately and, even if we could, of which we wouldn't really understand the relative importance even if we could measure them accurately, then you can see why we are in a classic scenario of no economist in the world being clear in their own mind about how it's all going to pan out.
Perhaps one helpful methodology would be to see how things are different.
Working against the 1970s stagflation theory is, I think, one powerful force -- the labour market is much less unionised. Labour, as it were, has lots much of its pricing power.
Also working against that theory for the moment is that quantitative easing is not having a noticeable effect on M4 -- a broad money measure that no-one has taken much notice of for years. At the moment it's expanding in the US and UK by about 3%. I have long held a theory that the great flaw in Friendmanesque monetarism was that restricting M0 was pointless because it had no impact on the "real" volatility or supply of money. Now it appears that the opposite is, at least in the short term, also the case. You can send M0, M1 and possibly even M2 (if I could remember what it was) through the roof, without making a blind bit of difference to the supply of money that matters.
The reason, as I wrote before, is that people are taking all of this money and (like me) are paying down debt with it. This might not be the best 10-year move, but it sure as hell is the best two-year move, and that seems to be the general maximum personal spending time horizon. If it makes P Birks Inc short of capital three years down the line, then, well, I've shown that my credit is good, and I'll probably be able to borrow it back.
Low interest rates, in this sense, aren't stimulating the economy at all. There's nowhere to put my money efficiently, except to pay down my old fixed-rate debt. The increase in the proportion of fixed rates and inflation-index deposits/borrowing have served to decrease the impact of pumping money into the economy. (I'll admit that there's a slight hole in this argument in that variable rates are themseloves something of a newcomer to finance -- so cutting rates and pumping money into the economy in the 1930s should have had a similar "pay down debt" effect. But it didn't. I'll have to have a think about that one.)
Working against the 1930s Keynesian stimulus is, I think, a lack of government "slack". basically the opportunity for the government to spend masses of money to stimulate the economy (at least in the UK) is busted by (a) the danger of the UK losing its AAA rating if it borrows any more so to do and (b) half of the country has become an effective state economy already. Northern Ireland and many parts of the north-east of England have been kept from becoming ghost towns or lands of anarchy only by decades of the state pumping in money. Thirty years of Keynesian stimulus has merely kept the status quo.
What works against the 1990s Japan argument? Well, the most important, I think, is that Japan's "fight" against deflation was nothing but. While the Japanese Treasury was doing one thing, the Bank of Japan was doing another. Every time one side pushed the expansionary button, the other choked off the recovery.
In other words, if we carry on with the current stimulus without the ECB choking off the recovery at the pass, we're going to head into a very strange situation indeed. The macro-economics of it in Europe would appear to back the Aardvark argument. If Germany manages a massive expansion (because Greece and Spain are so weak that the euro stays soft, thus helping German exports to the US, Japan, and China) while Spain stays stagnant and greece contracts, it really gets harder to see the euro surviving more than five years. The worry is (see above) that the ECB will "solve" this problem (the threat of the eurozone disintegrating) by choking off German expansion rather than encouraging Greece and Spain to get their act together.
The current situation looks likely to me to lead to some kind of odd "permanent crisis", with tactical moves being made every year to attempt to solve the latest mess. This situation could, I suppose, last a long time. No grand vision, but lots of white-coated little men with little imagination running around trying to stop the latest leak in the dyke. While that isn't an ideal scenario, I suppose that, if it stops the dyke collapsing until after I am dead, it is at least the best that I can hope for.
+++++++++++
