Thursday, 9 October 2008

Battling for a frame

Throughout the last two decades, policymakers responded to most problems by cutting regulations and easing passage for capital to flow between countries. The end of ideology they called it, and that statement reflects the acceptance of a new hegemonic regime, a new form of normality.

The Right had won the debate about the appropriate relationship between the state and government, and the Left – most notably Tony Blair and Bill Clinton – adopted the Right’s frame of reference and promised only to make the deregulated economy work in the interest of everyone (whether this worked or not is a different point). But the credit crunch is changing things. It seems increasingly likely that deregulation will end up being one of the main ideas to get the blame for the credit crunch. This is something that John McCain is struggling with, having to make a case for greater state activity after years of advocating deregulation and arguing against the state. In today’s Mail, Peter Oborne laments this situation but his analysis seems weak given that the roots of the credit crunch are to be found almost entirely within the private sector.

But if one hegemonic regime is falling away, there is room for a new one to form making this a fascinating time, one where left-wing writers, for so long on the wrong side of events, are jostling for intellectual superiority amidst much harrumphing about how correct they were all along. The battle now is between different frames – which analysis of present events will be accepted? Here are some frames being thrown around:

- Smash the rich
- Earnest social democrats
- Depressed right-wingers
- Head in the sand muppets

None of them really rock my world, in case you were wondering. More on that one day, I'm sure.

- Apax chief slams own industry ... “it’s not balanced and people will give us more debt than we ought to take”.
- Weapons of financial destruction exploding tomorrow?
- Glimmers of light? Unsure, but a great article about reality of the debt market.
- I declare it to be the end of breakfast (thanks Matt!)
- An explanation that even Joe Six Pack would understand: I’ll have a McFear to go
- Alphaville publish an epic explanation of the US government’s debt position.

Comment on Alphaville:
"No diversification in most cases because hedge funds started out as alpha producers but couldn't generate the absolute returns on a fully hedged basis and so are now all beta and leverage. So correlation with long-only in the good times is now very strong and in the bad times is close to 1. So why pay 2/20 for that?"

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