Gregor Weekly Macro Note: Saturday 07 November 2009

• Gregor Macdonald
• November 7th, 2009

You should always carry around with you a few unanswered questions. In this way, the world may hand you the answers when you’re not engaged so completely, in trying to figure everything out. I often find this happens for me on trips, especially when I use trains and airplanes. This week for example I took a commuter train from the depressed industrial city of Fitchburg, Massachusetts into the very hip and happening city of Cambridge, Massachusetts, where I spent the entire day taking in lectures at MIT, and Harvard. In that 90 minute trip, one can see alot of US history, and the potential for where we might go next as a country.

Fitchburg, being near forests and a river, was like many upper New England cities engaged for many years in the paper industry. Of course, that’s an industry without much of a future these days and it was interesting to pass by the abandoned (ruined) mills and water-works on my way to Cambridge and MIT, which of course is now very much a (paperless) digital center. On the return trip as I left digital Cambridge on my way back to Fitchburg, I began to wonder if the last quarter century of financialization, in which we attempted to substitute monetization for production, would now lie entombed for at least another 75 years, like abandoned millworks.

I should mention that paper was not Fitchburg’s only industry. They used the steppes and cascades of the river to manufacture other goods too. Equally, at Harvard and MIT, they are still running through a fair amount of paper. Instead I found myself wondering how many years it will take to clean up the mess from our financialization period. This is a question I have about transition more generally. My studies in this area, primarily in energy transition, suggest the common cultural perception is that populations move quickly from one economic phase to another. And that’s just not true. Instead, these transitions take time.

I’m glad that so many talented people are working on the future at MIT. My sense, however, as I sat in rooms both there and at Harvard was that we will all be dislocated further before the future more fully arrives. First, I thought it was appropriate that the financial crisis, or recession, or the depression–whatever you want to call it–was incorporated rather habitually into the Q+A sessions after presentations at MIT on urban planning, and at Harvard on the geo-politics of Population. Clearly, the depression has now been aggregated into just about every conversation. That struck me as both smart and obvious–but also telling. For, while many smart and talented people have come to accept the depression, another group of people–many of the nation’s economists, advisers to the President, and the Federal Reserve–have not. The longer this other group of people vacillate, and fail to admit we are dealing with the afterburst of an historic debt bubble, the longer this transition is going to take.

Thus, I had one question answered for me: this transition too, like others, will not be fast. We are in the midst of not only an economic transition, but, an energy transition. The wreckage of the financial era will be with us, weighing down on us, burdening us, and sullying our landscape for some time to come even as a new, more balanced economic era unfolds. In the medium term, however, there remains the question of how much further rupturing will be necessary to propel us to our future? I noticed this week that John Mauldin is thinking about a number of possible futures in his weekly missive, which he wrote (in part) after a long conversation with Niall Ferguson. More broadly, I am now seeing a convergence in the blogosphere and among many economic, energy, and cultural thinkers and writers that there is no miraculous, invisible hand that waits in the wings to stitch back this economy from its deep, structural fissures.

Another question I’ve been carrying around, therefore, was how far down the road exactly were we going to travel in the direction of a currency crisis. Would we get all the way there, or perhaps just travel far enough in that direction to scare everyone and unleash a new panic? The action this week in the markets leads me to conclude…(this article continues for subscribers through the membership gateway, on the right side of this page)

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More from Gregor Weekly

• Gregor Weekly Macro Note: Saturday 05 December 2009
• Gregor Weekly Macro Note: Saturday 03 October 2009
• Gregor Weekly Macro Note: Saturday 21 November 2009
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