Every year we hold two horse training clinics at our farm in Wisconsin. The main goal of our training exercises is keeping the horse sound. Our teacher is fond of a saying, “Physical balance is emotional balance.”
And it’s true… If you work a horse properly so that she learn to carry herself in balance, you have a very solid horse, both physically and within her own mind. A horse that has learned to carry herself can be both powerful and nimble. She can change gaits smoothly, execute turns on a dime, come to a halt without the jarring sensation of hitting a wall.
And she can do it all with calmness and grace.
(On a side note: My horse Fig and I aren’t there yet!)
Balance is universal… We can see it in our own physiology and elsewhere in the natural world. Look at a tree or a fish. You can see the symmetry.
But what would your say if I told you that balance is even in our economies and our markets?
Think about it… Think about how bubbles are created, or depressions for that matter. They are created because of an imbalance. Too much “irrational exuberance” or too much fear and panic. These emotions are contagious, and when there’s no emotional balance, there is no physical balance.
The health of our economies and markets are a function of our emotional state.
Here’s where things get interesting…
Horses don’t always have to be in balance. In the wild, they can throw themselves around, spin, wheel and fight. But when we bring them into the domestic world, and expect them to carry a rider, their former idea of balance needs to be reprogramed. They need to learn to carry a person by carrying themselves in a different balance.
And that means training and work.
The same is true for economies. Think about the true laissez-faire markets before regulation, before rules, before the first boom and bust. Before the economy learned to carry itself. They were wild and untamed.
Monetary policy is like training a horse… except today’s policy wonks have a heavy hand and no eye for balance. Policies are supposed to help put the economy in balance. Through austerity or stimulus… Most often, it’s not one or the other, but a delicate use of both at the right time.
A year ago, Bloomberg reported:
“The Group of 20 will take “concrete actions” to bolster growth while backing the normalization of monetary policy in advanced economies, according to a draft communique seen by Bloomberg News.
“We commit to developing new measures to significantly raise global growth, while maintaining fiscal sustainability,” the draft for this weekend’s meeting of G-20 finance ministers and central bankers in Sydney says. “We recognize accommodative monetary policy settings in advanced economies will need to normalize in due course, in line with stronger growth.”
Has it worked?
A year on, we still don’t know. The U.S. economy has made strides in unemployment and manufacturing, and our housing market has stabilized, But real growth? We have no idea what our real growth is because we’re still pumping massive amounts of capital into the markets.
We’re holding the horse in a frame we find pretty, without knowing if the horse can carry herself well or not. The economy has been pulled so far askew that the “normalization” these folks were talking about last year won’t do anything to stop the threat of true inflation down the road.
I think they’re going about it the wrong way. Australia, for example, said that with ambitious policies, collective GDP growth could be raised by 2% above the forecasted trajectory over the next five years.
Balance Over Growth
But there are a thousand and one ways to reach that goal and many of them are not pretty. The key tipoff is the word, “ambitious.” Many ambitious policies have no regard for balance. I think the goal itself should be balance, not growth.
After all, the economy and the markets affect real people, and I for one don’t want to be bucked off.
It’s doubtful that any policy maker will make such a decision for the soundness of our global economy. But at least one person’s got the right idea:
Martin Whetton, an interest rate strategist at Nomura Holdings, said in response to all that ambition, “While a noble goal, realistically to achieve that sort of sustainable expansion will require a lot of things to go right.”
How much faith do you have in that?
The post Balance, Not Economic Growth appeared first on The Women's Financial Alliance.