[Reading] The Sage

“Life has a gap in it, it just does.” 

For one thing, as all the great wisdom traditions have taught, learning to be satisfied with little makes us calmer, less anxious and more able to deal with the imperfections of life. Wanting the maximum, in contrast, makes us grasping, constantly aware of what we do not have.

Too much also tends to spoil what you already have, whereas too little at least preserves it. Overeat and the dinner is spoiled by nausea and indigestion. Leave the restaurant a little hungry and at least you haven’t ruined your enjoyment of what you have had.

That does not mean we should be happy for our life gardens to contain large, uncultivated areas, of course, or that we should not put in something extra that will flourish if we see the opportunity. Making the most of your limited life need not mean hankering after a different or bigger one. But it does suggest that if you spy a gap, as Margot’s friend says: “Don’t go crazy trying to fill it.”

The Shrink

An entertaining and potentially revelatory self-development exercise is to imagine alternative lives. The idea is that this may lead you to neglected aspects of yourself that could do with some attention. What do you fancy being? An opera singer? A monk? A foreign correspondent?

It can be tantalising, a bit like walking up a lovely mountain path and noticing trails going off in all sorts of intriguing directions. With the best stamina in the world you can’t explore all of them, but you can’t help wondering what breathtaking panoramas you might be missing. Similarly, even if you are happy with your life, there will always be alternative paths – desires, potentials and capacities that you could develop – but you can’t know where they might lead.

Sometimes responding to the lure of such dormant potentials is easy: we can just choose to cultivate a certain quality a bit more. You may not be able to go for a complete life change, but perhaps you could still join a choir, make room for contemplation, do some travelling – or even read more travel books.

At other times it’s trickier: you’ve become aware of nurturing an inner sculptor, say, but sculpture doesn’t quite fit into your already overcommitted life. It’s even harder when it comes to relationships, since rarely do we get everything we need from one person, and it could be unwise to keep chasing perfection when good enough is ... well, good enough.

There are times when accommodating an undeveloped potential requires radical life shifts, but how do we know when such a big adjustment is in order? Of course there are no off-the-shelf answers, but you could ask yourself a few questions. One is how urgent the need to change direction is, how important it is to have this missing ingredient in your life. Another is to what extent you are genuinely dissatisfied with your life rather than just responding to a fleeting curiosity or passing cloud of boredom.

Gaps are part of the human condition, so we can never fill them all. The point is deciding which ones we can live with.

[Newspaper 20120704] Eurozone ESM

Eurozone's rescue funds to recapitalise undercapitalised banks directly, rather than provide money via vulnerable governments (of particular benefit to Spain and potentially enormous benefit to Ireland) and to buy sovereign bonds in the market (of apparent benefit to Italy and Spain).

It was also agreed that loans from rescue funds would not be senior to existing loans, which should reduce the risk of panics by lenders. Leaders also agreed a €120bn ($151bn) package of measures to promote growth. On the principle that support should coincide with control, the European Central Bank is to be given responsibility for a new system of European banking supervision, as a step towards what protagonists hope will be a true banking union.

Yet what was not agreed is even more important. The list includes any increase in the funds available for the European Stability Mechanism (capped at €500bn); eurozone bonds, in any form; and a eurozone-wide deposit guarantee or bank resolution regime. 

Meanwhile, it needs to be stressed, the ECB has no intention of being buyer of last resort of sovereign bonds.

Thus the most important positive element is the movement towards breaking the mutually destructive links between banks and sovereigns. This is a step towards the eurozone equivalent of the US troubled asset relief programme, or Tarp. A consequence must be to take the responsibility for supervision out of the hands of national governments. The result is also going to be a huge further increase in the powers of the ECB. At the same time, this is only a small step towards a full banking union, which would require a bigger fiscal back-up than anything now available. 

The decision to let the rescue funds buy government debt in the market is even less meaningful and could prove destructive, as the Belgian economist, Paul de Grauwe, now at the London School of Economics, argues in a recent article.* The outstanding debt of Italy and Spain is close to €2.8tn, or a little less than six times the size of the ESM. It is well known from the work on currency crises of Paul Krugman, the Nobel laureate, that speculators can bet safely against a fund known to be too small to stabilise a market. The only credible stabiliser is an entity with infinite firepower. In the case of sovereign finance inside the eurozone, the only entity able to protect a country against selffulfilling runs on its sovereign debt is the ECB. Since the ECB is unwilling to act in this role and leaders are unwilling to give the ESM the powers to force it to do so, these proposals amount to spitting in the financial winds. Markets may have worked this out: while bond spreads have fallen, they remain dangerously elevated (see chart).

In substance, then, these are small steps, incapable of achieving the three necessary conditions for an end to the crisis: a definitive separation of banks from sovereigns; financing of weak sovereigns on manageable terms during the lengthy period of economic adjustment and retrenchment; and, above all, a return to healthy economic growth.

Let us not be too grudging: the decision to allow the ESM to recapitalise banks directly is possibly very important, both in itself and for what it portends. It might transform Ireland's position. Nevertheless, the biggest danger is that the economics of the eurozone are deteriorating fast. Joblessness reached 11.1 per cent in May, the highest on record for the zone. Worse, apart from its refusal to intervene in sovereign debt markets on the needed scale, the ECB is hopelessly late in taking necessary monetary action. With austerity biting in vulnerable countries, everybody is feeling the pinch: even Germany is not immune to downturns in big trading partners. It is conceivable that the eurozone will struggle through this economic trench warfare over the next several years. However, the costs - not just economic but also political - are likely to be enormous.

Yes, the eurozone does need a new constitution. But the priority is to get economies moving. Until then, the risks of further crises remain.