I recently watched a TV production of Un Ballo de Regina, a Balanchine ballet set to music by Verdi, and I had this strange sensation you sometimes get when you listen to music you’ve never heard before: every successive note seemed to be just what you thought it was going to be, and yet, to be honest, you couldn’t quite predict it. There was something both inevitable and yet unpredictable about what came next, but it was deceptive because you couldn’t have foreseen it, though it sounded like it had to be. You weren’t the composer and yet you had the illusion you might have been. I suspect this has something to do with the nature of Time and why music can keep you in the present and temporarily evade the future. You have to be unconscious and yet still in control enough to watch your unconsciousness to evade Time in a meaningful way.
Which brings me to the bailout.
The psychological trouble with current attempts to fix the economy by stimulation is that they don’t have that air of unpredictable inevitability that is associated with good music and inspired action. Everything the people in authority now do has an air of delayed predictability. The nationalization of failing banks, when it comes, will be accompanied by the sound of dragging heels. I have an image of a child being reluctantly pulled towards the bedroom, his heels scraping against the carpet as he resists the inevitable bedtime.
What’s needed is to get people confident enough about the future to spend again. I’m increasingly skeptical that public spending will quickly effect this, because confidence is shot. Everyone is going to be cautious about spending for a long time from now on, Keynes or no Keynes. The velocity of money slows as everyone starts to hoard, and GDP declines despite an increase in money supply. One way to fix this is to charge a fee for saving your money, i.e. negative interest, or high inflation, use it or you lose it, but that’s fearful velocity, not confident velocity. Another is lower taxes, putting more money permanently in people’s pockets, but that leaves less for government spending initially, and has no effect on the unemployed. A third is a charismatic confidence-inspiring leadership, but think Germany in the Thirties. I’m a little stymied for now, and so, I sense, is everyone else. There’s no quick fix and no substitute for good fresh wise leadership.
Originally published at Wilmott.com and reproduced here with the author’s permission.