In an Project Syndicate article entitled ‘Secular Stagnation or Self-Inflicted Malaise?’ a couple of weeks ago, Hans-Werner Sinn, former president of Germany’s ifo economic institute argues that the implementation of unconventional monetary policy preempted the ‘creative destruction’ that could have formed the basis for a new upswing in growth. According to him, there cannot be a new boom without a bust, and since there has not been any bust since 2009 because of the central banks, there cannot be any boom. His conclusion: the current macro-economic malaise has been self-inflicted.
19th century German philosopher Friedrich Nietzsche would have probably agreed. In ‘Beyond Good and Evil’ (1886) he stated: “The discipline of suffering, of great suffering — do you not know that only this discipline has created all enhancements of man so far? That tension of the soul in unhappiness which cultivates its strength, its shudders face to face with great ruin, its inventiveness and courage in enduring, persevering, interpreting, and exploiting suffering, and whatever has been granted to it of profundity, secret, mask, spirit, cunning, greatness — was it not granted to it through suffering, through the discipline of great suffering?”
Nietzsche might thus have argued, like Mr. Sinn, that everything which has been done by the Fed, the ECB and their brethren since the Great Financial Crisis has been to avoid suffering in the senseless pursuit of indulgence, at the expense of progress.
What might be pertinent at the macro-economic level is not necessarily true at the micro-economic level, though. Due to its inherently deep cyclicality, the industrials world has been subject not only to booms but also to busts. The suffering has been and remains real, and I doubt the upcoming Q3 results and accompanying outlook will provide much relief (please find our team’s take below). If Nietzsche is right, these painful times will remain propitious to the execution of great things.