The Weekly Quill — The Phoenix Fails to Rise

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Tracking Recoveries in the 2020-20201 Credit Cycle

 

If we only had 500 years. Alas, the shortness of life does not grant the luxury of burning it all down to then rise from the flames cleansed anew. The Greek word khemeia translates into the art of transmuting metals, hence the allure of the concept of alchemy to that special province of the human mind in which blind faith resides. True believers’ struggle with atheism is born of their own mental frailty. Most struggle to reject the idea of transforming the ordinary into the extraordinary in inexplicable ways. How else to categorize that about which science has never elucidated? Alchemy’s talisman is the phoenix, a magnificent bird of Ancient Greece that lived for 500 years in Arabia but then flew to the Egyptian city of Alexandria, the birthplace of alchemy to undergo its ritual death and regeneration.

Following Alexander the Great’s conquest of Egypt, the city that bore his name became the center of Greek learning during the Hellenistic period. The most prominent of Alexandria’s alchemists was Zosimos of Panopolis, Egypt, who is said to have lived in the third or fourth century A.D. and endeavored to create the mystical ingredient of xerion, which is Greek for powder. Through the semantic ages, the word metamorphosed from Arabic into Latin and modern European languages as elixir. The journey complete, legend made it into the elusive “Philosopher’s Stone.” Hence, the phoenix, which symbolizes the consummation of the Great Work – regeneration through fire associated with the sulfuric process of cleansing and transformation into the fiery golden winged creature that shoots up towards the heavens.

In the fifth century, alchemy descended with the fall of the Western Roman Empire. Six hundred years later, when scholars translated Syriac and Arabic manuscripts of Greek scientific and philosophical works into Latin, the universal language of educated Europeans, alchemy itself was reborn. Throughout the Middle Ages, the ancient art held the fascination of the intellectual community. Repeating ancient China’s experience in its quest for a supernatural means to turn that which is less precious to gold, alchemy’s ultimate 16th century demise was grounded in its failure to engineer bullion. If only the story had ended there.

In his 2013 crisis retrospective, The Alchemists, Neil Irwin raised to reverence three men – the Federal Reserve’s Ben Bernanke, the Bank of England’s Mervyn King and the European Central Bank’s Jean-Claude Trichet. Seemingly unaware of the hero worship that blinded him, Irwin asked “What allowed this deeply unpopular agency to emerge from the crisis scratched and bruised but, if anything, more powerful than it had been before? Its tentacles turned out to be so tightly wrapped around American business and politics — large and small, national and local — that it was almost impossible to kill.”

In a Washington Post book review, Bethany McLean, co-author of All the Devils Are Here: The Hidden History of the Financial Crisis, wrote, “Irwin wants his heroes to be heroes, but people in Ireland and Greece might disagree, as might people in the United States once the price for Bernanke’s cheap money policies becomes clear — because everything always has a price. Nor does Irwin acknowledge the deeper argument that the Fed actually played a role in creating the crisis, both by utterly failing in its supervisory role and by instilling a belief that the central bank will always step in to save the market, thereby contributing to a misallocation of capital. In other words, it’s too soon to be so sanguine. Someday in the not too distant future, we might be calling central bankers the anti-alchemists.”

The “not so distant” future arrived seven years later. The alchemists have never been busier. Despite crashing Japan’s and Europe’s banking systems, the Bank of England is pondering negative interest rates. Draggled in deflation of their own making, policymakers at the European Central Bank are standing “ready to add stimulus if outlook worsens.” And the Fed, mired in misfeasance and in blatant collusion with the Treasury Department, has placed capitalism in America at grave risk.

 

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