tweets become. It is as if America, despite its flaws, keeps winning the global ugly person beauty pageant. There’s no question our problems are serious. With the rise of Artificial Intelligence (AI), for example, at least half of American jobs could someday be done by a machine. Yet America still has the building blocks for higher growth. Compared to the rest of the world, we have advantages, including in technology and energy. And we enjoy a culture that still tolerates innovative risk — taking and failure — and respects the rule of law. The American Dream is still alive. Women in America, after all, are
prices kept rising. For the Fed, the wild card is
Because the current one tells the story of a
starting new businesses at twice the rate of men.
the potential for global capital seeking a safe
dysfunctional Washington in which both par-
haven to rush into long-term U.S. government
ties are out to kill each other. Compromise is
N MAGAZINE: At today’s valuations could you see
bonds. Long term rates drop even as the Fed
a dirty word so nothing ever gets done. The
a major stock market reversal or even a crash?
is raising short term rates – a tricky situation
White House is dysfunctional. Plus, a corpo-
SMICK: Certainly the global financial system is
that has historically been destabilizing to the
rate capitalism of inside deal-making is deter-
safer today than it was in 2007 just before the
financial system.
mined to maintain the economic status quo, squashing upstart competitors. We need a new, bipartisan narrative for growth based on an explosion in innovative risk-taking. In the history of the West, the great increases in per capita income came during periods when average folk, not just the
Great Financial Crisis. It is unlikely that a sys-
N MAGAZINE: You’ve said that we need to rewrite
elites, were engaged in commercializing both
temic crisis will stem again from the banking
a new narrative for our country to thrive. Can
existing and new technologies through enter-
system. But it is still far too early to declare
you explain that?
prise startups. Nobel Prize-winner Edmund
complete victory. The financial system has
SMICK: I buy the argument offered by Robert
Phelps argues that during these periods, aver-
yet to feel the full effect of technological dis-
Shiller of Yale that at the center of a healthy
age folk became everyman “idea machines.”
ruptions. I agree with the market analyst Mo-
economy is a compelling narrative. The more
It’s kind of like the movie Joy. The female
hamed El-Erian who argues that certain seg-
that consumers, investors and the entrepre-
protagonist invented the “Miracle Mop” as a
ments of the non-bank system are in the grips
neurial sector believe in the narrative, the
means of escaping a dire personal economic
of a “liquidity delusion.” In other words, some
more confidence they have as economic ac-
situation. Throughout history, the big jumps
products risk over-promising the liquidity they
tors, and the better the economy performs.
in per capita income came when a kind of
can provide for transactions in high yield and
Of course, the
emerging-market corporate bonds that are par-
narrative has to
ticularly vulnerable to market volatility. Like
be
most analysts, I’m also worried about a so-
In
called “Black Swan” event — some complete-
for example, the
ly unanticipated geopolitical, governmental
narrative of op-
or market-related crisis. But we’ve survived
timism was that
them before, and will so again.
the stagflation dragon was in the process of
Main Street Capitalism came into vogue. The
I’m not as worried about the Federal Re-
being slain. Stock prices soared. In the 1990s,
economy benefitted from a bottom-up dyna-
serve returning short-term interest rates to
with the fall of the Berlin Wall, the new nar-
mism.
their historic levels. When the Fed several
rative was that the U.S. economy was about
years ago ended its quantitative easing (bond
to receive a powerful peace dividend. Again,
ger people believe effective change is either
buying to keep interest rates low), the finan-
the market soared.
an illusion or an impossibility, the greater the
the
1980s,
Why do we need a new narrative?
The clock is ticking because the lon-
chance pessimistic attitudes harden.
N magazine
cial response was surprisingly minimal. Stock
fact-driven.
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