Merry Christmas! Or, 5 tips to staying sane over the festive season…

A puppy is for life, not just for Christmas – On the other hand, some of your more distant acquaintances (and some family!) may well only be for Christmas. Because you haven’t seen them for ages, it’s all too easy to slip straight back into last year’s arguments. If you know this happens, make a special effort to view them with fresh eyes, as if you’ve only just met. You’re unlikely to solve tensions of a lifetime over a few cold days in December; the arguments will only drag you down.

Loose lips sink ships – And nothing loosens them quicker than alcohol. If you’re already feeling irritated, a little too much liquid Christmas cheer will probably just cause you to say something you’d otherwise regret.

“I vant to be alone!” – Make time for yourself. Houses fill up over the festive period, creating less space and more friction, especially if you enjoy peace and quiet. Try going out for a walk occasionally. You never know, you might even enjoy the frosty scenery.

It’ll be lonely this Christmas… -  but if you’re on your own, or feeling lonely even around others, remember that for all the fuss, there’s nothing intrinsically special about these few days. All the cultural meaning we impart to it is man-made symbolism, created consicously & unconsciously through mutual reinforcement and over time. Christmas Day is also just the 25th of December, and New Year’s Day is just the 1st of January.

A change is gonna come – New Year’s Resolutions can sometime help move one from pre-contemplation into the contemplation phase of making changes, but unless planned carefully, they’re easily discarded making last-minute resolutions more likely to be a millstone around your neck or a reason to feel guilty about failing to make changes. So don’t make a resolution unless you’ve thought about it, and really mean it.

Feel free to add your own tips to the list!

A Very Merry Christmas & Happy New Year to everyone out there!

The Wisdom of Walter Bagehot

Readers of The Economist will already be familar with the name Bagehot, it being the title for their UK-focused regular column. I suspect fewer will have read anything by the man after whom it is named.

I recently had cause to browse Lombard Street: A Description of the Money Market (a free online copy can be found at Project Gutenberg). Written in 1873, in the aftermath of a banking crisis (Lombard Street is in the City of London, and used in this context to refer to the global banking system), it’s a remarkably prescient view of our current situation, and one worth citing from directly. I will not provide much further commentary as his quoted words are self-explanatory both in their description of the problem and the least-worst solution. I’ve also kept any modifications to the absolute minimum required to retain comprehension on stitching the quotes together.

The briefest and truest way of describing Lombard Street is to say that it is by far the greatest combination of economical power and economical delicacy that the world has even seen. Of the greatness of the power there will be no doubt. Money is economical power. But very few persons are aware how much greater than the ready balance is the floating loan-fund which can be lent to anyone or for any purpose.

A million in the hands of a single banker is a great power; he can at once lend it where he will, and borrowers can come to him, because they know or believe that he has it. But the same sum scattered in tens and fifties through a whole nation is no power at all: no one knows where to find it or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause which has made the Money Market so exceedingly rich.

It is a luxury which has never been enjoyed with even comparable equality before.

But in exact proportion to the power of this system is its delicacy. Only our familiarity blinds us to the marvellous nature of the system. There never was so much borrowed money collected in the world. If any large fraction of that money really was demanded, our banking system and our industrial system too would be in great danger. The amount of cash-in-hand is so exceedingly small that a bystander almost trembles when he compares its minuteness with the immensity of the credit which rests upon it.

We do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company’s capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

Ordinarily discredit does not at first settle on any particular bank, still less does it at first concentrate itself on the bank or banks holding the principal cash reserve. These banks are almost sure to be those in best credit, or they would not be in that position, and, having the reserve, they are likely to look stronger and seem stronger than any others. At first, incipient panic amounts to a kind of vague conversation: Is A. B. as good as he used to be? Has not C. D. lost money? and a thousand such questions. And every day, as a panic grows, this floating suspicion becomes both more intense and more diffused; it attacks more persons; and attacks them all more virulently than at first. All men of experience, therefore, try to strengthen themselves in the early stage of a panic [by limiting credit].

A panic, in a word, is a species of neuralgia; you must not starve it. The holders of the cash reserve must be ready not only to keep it for their own liabilities, but to advance it most freely for the liabilities of others. They must lend to merchants, to minor bankers, to ‘this man and that man,’ whenever the security is good. In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them.

There should be a clear understanding between the Central Bank and the public that, since the Bank hold out ultimate banking reserve, they will recognise and act on the obligations which this implies; that they will replenish it in times of foreign demand as fully, and lend it in times of internal panic as freely and readily, as plain principles of banking require.

We should also look at the rest of our banking system and try to reduce the demands on the Bank as much as we can. The central machinery being inevitably frail, we should carefully and as much as possible diminish the strain upon it.

It may be said that the reserve in the central bank will not be enough for all such loans. If that be so, it must fail. But lending is, nevertheless, its best expedient. This is the method of making its money go the farthest, and of enabling it to get through the panic if anything will so enable it. Making no loans as we have seen will ruin the country; making large loans and stopping, as we have also seen, will ruin it. The only safe plan for the Bank is the brave plan, to lend in a panic on every kind of current security, or every sort on which money is ordinarily and usually lent. This policy may not save the Bank [and the country]; but if it do not, nothing will save it.

Bagehot went on to describe the importance of central bank lending at a premium to the pre-crisis rate & to lend against collateral, both to ensure moral hazard remained. The US Federal Reserve, The Bank of England, the Bank of Japan and even China’s central bank have all read & understood Bagehot and turned on the money tap to keep the global system from seizing up entirely and so utterly destroying the quality of life of billions of people. The European Central Bank likely also understands it, given its participation in the 30th November 2011 central bank agreement to increase dollar liquidity. Unfortunately, it is currently prevented from acting further due the legal limitations placed on it by, primarily, the Germans in terms of using one of a central bank’s greatest assets: printing money to permit that liquidity flow and devalue currency, even at the cost of inflation.

As we begin to see the cautious outlines of a potential “grand bargain” on lending involving the IMF, the world’s major central banks, the BRICS, and Eurozone fiscal policy union, let’s hope they haven’t left it too late…

Measuring Power

Image by JAS_photo via Flickr

Forbes magazine loves lists. One of their annual features is World’s Most Powerful People, the latest revision of which has just been published. The names on the list change occasionally; the order of the names changes more frequently. But what is power, why does it matter, and can it really be measured?

For Forbes, a business-orientated publication, the answer is a calculus of the financial, human and physical resources an individual can draw upon. Unsurprisingly, their list is therefore dominated by global political and business leaders. This demonstrates an important feature of power: it is as much in the eye of beholder (or in this case, beholden?) as beauty is.

On a global scale, Forbes’ list is not a bad attempt. If the world is a pond, Forbes measures the potential ripple effect created by an individual landing on its smooth surface. Current #1 Barack Obama is undeniably a bigger stone to throw in than a random African villager.

Another analogy would be the distortion of the fabric of space-time by large celestial objects. Massive bodies like the Sun or Jupiter create deep gravity wells, drawing other objects into their influence, to the point of bending light around them. At a gravitational extreme, a black hole creates a gaping maw that does not permit anything else to shine. People can create a similar effect on those around them.

One theory of planet formation is that small particles gradually accrete together, eventually forming planets. This analogy allows for an understanding of how large organisations wield power. Obama is not powerful because he is Obama; he is powerful ex officio as a result of the combined wealth & military might of the United States, and there are certainly those in the world who, rightly or wrongly, like to complain that the USA doesn’t let them shine.

Maintaining the strength of an organisation is therefore one method of its leader maintaining power. A more sophisticated analysis would point to the increasing importance of networks rather than organisations. To use Obama again, the power of the President of the USA is magnified through the network of allied nations whose political favours it can draw upon. On a more modest level, an individual’s power over their own network is magnified if they are the hub or major node of the network rather than a distant spoke.

All these forms of power are extrinsic in nature; they correlate power with the ability of an individual to influence the world around them. I would argue that this is a fundamentally unwise way to measure power.

Why? Because it is ultimately dis-empowering; it is a game no participant can definitively win. It is impossible for an individual to maintain their position at the head of an organisation or network indefinitely; new players keep entering the field, and the field of play itself continuously mutates. Essentially, to play this game requires you to accept a life of running to stand still, akin to a giant hamster wheel. It is not the act of a powerful person to subjugate themselves to a system in this way.

True power is intrinsic. It is the acceptance of self that comes from being able to stop. Epicurus famously said, “I would rather be first in a little Iberian village than second in Rome”, and the logical extension of this is to reduce the circle of concern to that within which it is small enough to remain permanently first. This is of course the individual himself. Mastery over one’s own life & emotions is the real challenge, and true mastery over these domains is real power.

Epicurus goes on to describe the nature of this challenge: “the art of living well and the art of dying well are one”. In other words, in order to achieve mastery over self, it is necessary to come to terms with death and the end of one’s existence. This is easy on an abstract level, and much harder on practical/personal one. Nonetheless, it is good to acknowledge the reality of the problem facing us instead of pursuing the endless distraction of extrinsic power. “It is better for you to be free of fear lying upon a pallet, than to have a golden couch and a rich table and be full of trouble”, as the aforementioned philosopher also said.

As those who know me will attest, I am no fan of a poverty-stricken hairshirt existence. Money is important. It has an undoubted – and powerful – insulating effect, permitting an individual the necessary psychological breathing space required to focus on the self. But if I may be permitted a final quote: “Not what we have but what we enjoy, constitutes our abundance”.

Honey, I couldn’t be happier than if they were based on real grades

Hand-drawn (by one of the negotiators) diagram of the eurozone deal, via Reuters. Note the many question marks...

We have an eurozone deal. The huge sense of relief felt by worldwide markets was almost palpable in its intensity, with global indices soaring in unison.

Of course, it’s a massive temporary fudge with large blank spaces that need filling in over the next few weeks. And in itself it does nothing to address the underlying structural problems of the eurozone (more on that later).

But it’s a lot more than I expected last week, so I’m pleased that enough heads could be banged together to at least come up with something. More importantly, it really felt like some tough decisions had been made.

Which brings me onto the difference between substance and appearance, and the vital importance of psychology in bridging the gap.

The title of this post is taken from the grossly underrated mid-90s movie Clueless. For the uninitiated, Clueless follows Cher (Alicia Silverstone), a Californian high school girl with a talent for manipulation and a fondness for matchmaking. The plot is loosely based on Jane Austen’s Emma but is shrewd enough in its updating to stand strongly as a work on its own.

The title quote is spoken by her father, proclaiming his delight at her ability to deftly manipulate her way into getting higher grades than her academic ability deserved, by pairing up two of her hard-grading but lonely teachers, improving their mood, thus making them more lenient graders. Reality becomes be a malleable function of applied psychology.

The movie has a lot more of these satirical, bitingly-accurate little asides. For instance, when Cher is asked her opinion of violence on TV, she replies, “Until mankind is peaceful enough not to have violence on the news, there’s no point in taking it out of shows that need it for entertainment value”. If you’ve never seen the movie, perhaps dismissing it as fluffy/superficial rom-com, you should definitely watch it. It neatly dissects the 90s as Heathers did the 80s, except it does so with affection rather than disdain.

The eurozone deal is currently based on ephemera. It has little real substance to it, as the details of the bank recapitalisations, haircuts and EFSF expansions are yet to be fleshed out. But what it achieves is psychological; it draws a line in the sand around the problem. To paraphrase Churchill, it feels like the end of the beginning. And that may be enough of a psychological sleight-of-hand to persuade markets to react accordingly, which will then translate perception and appearance into reality.

The American investor Benjamin Graham is famous for saying, “In the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine”. What he meant was that day-to-day fluctuations are based on volatile emotion & appearances but over the years, profitable businesses with a future will outperform unprofitable businesses.

For the eurozone to profit from the breathing space granted by the psychological drama of today’s deal, they must turn around their core business: they need to remedy the structural problems of monetary union without fiscal union. There are signs this will happen. EU President Barroso is pushing for deeper fiscal integration within the eurozone. Essentially, the richer countries will gain some control over the poorer countries’ budgets in return for helping them fund their economic deficits. This would certainly help mitigate the structural problems, though of course no-one really wants to talk about the potential democratic deficit created by such a move.

On a more parochial level, the UK may potentially be able to get the best of both worlds, benefiting from a more stable eurozone while remaining outside it, and retaining relative economic independence while still being part of the EU single market. It’s an exciting, if unpredictable, situation. There is a saying, popularly though inaccurately attributed to an ancient Chinese curse, “May you live in interesting times”.

We are certainly doing that. Better try to enjoy it.

The Meanings of Masks

What do you see in the above image?

If you’re anything like me, your first thought is “ritual cultic mask”.

In fact, it is thought more likely to be protective headgear worn during metal-working in Bronze Age Greece. The mask is one of many I saw displayed on a recent visit to the National Archaeological Museum in Athens. It is interesting that my preconceptions/mental associations of Ancient Greece as a powerful mystical cultural source led to my assuming the mask had an equally mystical role. It’s amusing to see one’s own assumptions turned on their head; it encourages further thought.

Masks are commonly thought of as means of disguise; a way to conceal identity from detection. But in fact, they can also be used to create identity. Think of the masks used in Greek theatre or Japanese Kabuki, both designed to evoke the spirit of a character and so allow the observer to know how to react to their stage antics. Think also of Venetian carnival masks, used in a more permissory manner to give the wearer freedom from their normal responsibilities; a license to be licentious.

Masks are also commonly used in funerary rites, especially in earlier eras (though the art of the modern mortician could be thought of as continuing this ritual remaking of the dead). The Mycenean golden death mask below is also from the Athenian National Archaeological Museum, and has the rare feature of depicting the dead person with eyes open:

The death mask illustrates another role of masks: to transform the person wearing the mask into something else. The image below from the Benaki Museum in Athens is not a mask (it’s a garment buckle) but my reflection in the cabinet’s glass while taking the photo neatly replaces my own face by the Gorgon’s face (you can just about see my shirt collar below). Another masked transformation of sorts…

Masks can therefore be co-opted as disguises, as emotional guides, and as transforming agents. And of course, they are deployed in a metaphorical way during our daily lives, as we mould our words and actions to suit different circumstances, sometimes suppressing our inner thoughts to do so.

On that note, I will end by quoting American author Clifton Fadiman on the risks of our using self-created masks too often:

For most men life is a search for the proper manila envelope in which to get themselves filed.

Crash Blossoms

Crash Blossom: the name given to syntactically ambiguous news headlines, based on the prototype:

Violinist Linked to JAL Crash Blossoms

Mike O’Connell, an American editor based in Sapporo saw the headline and whimsically wondered in an online forum: “What’s a crash blossom?”

I mention the crash blossom only because I read this headline earlier…

Virgin alerts infected customers

… and I couldn’t help wondering, “if she’s still a virgin, how on Earth did she infect them?”

The actual story can be found here. More amusing examples can be found in this Times article.

More on the power of clothes…

The sense of being well-dressed gives a feeling of inner tranquillity which religion is powerless to bestow.

- Miss C. F. Forbes, English writer, 1817-1911

As quoted in the The Times today (14th June), and an amusing example of synchronicity in light of my last few posts.

The Modern-Day Monk

It is not surprising that several guests at Friday’s Royal Wedding were anonymously quoted as “feeling jaded” yesterday. Anticipation of great events is commonly followed by a drained numbness, even if the event meets elevated expectations. Life thus passes by as a series of interspersed highs and, if not lows, mediocre neutrals. Is this the sum total of the human experience?

Man has historically found three ways to neutralise this nihilistic perspective: fame, religion and propagation.

Fame, with its associated glamour, can be fleeting or it can last a lifetime. Occasionally it outlasts its originating source and is considered worthy – or notorious – enough to be important to historical and cultural record. Whether transient or semi-permanent, its nourishment to the famous person is thin when weighed against the permanence of death. It can sustain the mind in the short-term, but is ultimately lacking.

To combat this failure of Temporal Power to assuage anomie, religion developed to offer believers escape from death, whether through reincarnation or heaven. Such Spiritual Might remains a comfort to many, channelling and guiding human emotion into soothingly predictable paths. Like Temporal Power, it offers individuals a larger sense of self that is part of a grander existence than Hobbes’ description of Man’s life as “solitary, poor, nasty, brutish and short”.

But for many, meaningful fame is impossible (the Warhol-esque 15 minutes of reality TV or social networking hardly counts) and religious faith escapes them, or is actively shunned. Frequently, their final refuge is propagation and it is a rare parent indeed that does not think of their children as the best thing they ever did.

Creating the next generation is certainly a valuable role; I would not want to see the human species wiped out! But does it truly offer a solution to the impermanence of man? I suggest not; the real essence of even the best of parents is lost from collective memory within at most four generations. As long as the parent does not think too deeply about this inevitable historical dissipation, Familial Legacy can substitute for either Temporal Power or Spiritual Might and stave off despair at the prospect of death.

What if none of the above are to the liking of the individual, if all are thought to fail the essential test of overcoming fear of death and giving life meaning, what then?

Enter the Modern-Day Monk.

The archetype of the man who seeks spiritual enlightenment through disengagement from the world is an ancient one. We see echoes of his presence in all the major world religions, mythologies and philosophies. Traditionally, the Monk has sought physical separation from the world; either to wander alone or in the company of select fellow travellers on a similar journey. He has used asceticism as a tool to aid enlightenment. Asceticism encourages the abandonment of sensual pleasure and material wealth, deeming these to be distractions from personal growth.

The Modern-Day Monk follows a different path to individuation. It is not physical abandonment of the world that is important, but intellectual detachment. This detachment from the value systems of others (the Temporal, Spiritual and Familial spheres) nonetheless permits material and emotional engagement with the world. He is able to weigh up and measure situations and people rapidly, allowing only positive effects through to his inner self. He comes across to others as tolerant and moderate, as he has no need to be otherwise. He enjoys the world, but does not let the world rule his inner heart. And in the face of new challenges, he has an inner core of willpower – a clear sense of self – to neutralise against torment.

The more philosophically (or religiously) minded will have already identified the characteristics outlined in the preceding four sentence as the Four Cardinal Virtues: Prudence, Temperance, Justice, and Fortitude respectively. The virtues are named Cardinal for being the hinge (L. cardo) upon which rests the door of life. It is not the door to a physical retreat from the world as the first step to an afterlife. It is a system to support and enhance our human desire to be part of the world, while not being ruled by it.

The Modern-Day Monk lives well, as well as wisely.

White Hair

Don’t dye it, don’t pull it out.

Let it grow all over your head.

No medicine can stop the whiteness;

the blackness won’t last the fall.

Lay your head on a quiet pillow; hear the cicadas.

Idly incline it to watch the waters flow.

The reason we can’t rise to the broader view of life

is because, White Hair, you grieve us so.

- Xin Qiji, 864-937, as translated in The Clouds Should Know Me By Now

The immortal and transcendent is lost to us because we tend to worry so much about our mortal and temporal problems. Learning to accept our mortality and its limits paradoxically frees us from those constraints. Or at least, from the emotional impact of those constraints.

Masters of Irrational Torments

Hermes Trismegistus, Image via Wikipedia

• Ignorance
• Grief
• Lack of Self Control
• Desire
• Injustice
• Greed
• Deceit
• Envy
• Treachery
• Anger
• Rashness
• Malice

The syncretic wisdom of The Hermetica continues to play on my mind. The above is its list of Irrational Torments.

Escape from them comes through the acquisition of Wisdom, in an iterative virtuous circle of self-reflection. In scientific language, it would be a positive feedback loop.

This is a remarkably humanist viewpoint for such an old text, where knowledge of the eternal comes not in an instant but by being willing to contemplate self-improvement:

“[God] is by nature a musician,

who composes the harmony of the Cosmos

and transmits to each individual

the rhythm of their own music.

But I have noticed

that when an artist

deals with a noble theme

his lyre becomes mysteriously tuned”

This may sound mystical and abstruse, but the practical life lessons that can be drawn from thinking in this way are omnipresent.

As I type, the Augusta Masters is approaching its climax. Golf may not be everyone’s cup of tea, but to play it well requires an ability to rise above both temporal and spiritual distractions. Mind and body must operate in harmony and irrational torments set aside. Sports professionals call it “being in the zone”, where everything becomes simple because their focus is pure. But this purity of thought is applicable to every life task, and to life itself.

As the example of Tiger Woods – currently charging through the field – shows, it is not enough to apply these lessons to one aspect of life alone. His much-publicised personal difficulties reveal an unwillingness to apply a similar degree of thoughtfulness off the course. He has been quoted in the past as saying that he’s happiest when playing a round of golf, and this is not surprising. It is at these moments when he works the hardest to achieve balance.And yet he does not make the connection that this sense of balance is something he could also find in his personal life, if he applied the same degree of effort to it.

His challenge is the same as the rest of ours; to strive to be as wise in the rough as on the fairway.

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