Macro and Football

A devout reader of this blog knows I love macro and JD. But what you don’t know is that I also love football. And by football as an American boy I mean that game with 11 players on each side of the ball and 11 sometimes properly inflated elongated balls. I started playing youth football at a time when helmets lacked face guards and when it was not normal for quarterbacks to have intimate touching with a player called the center. Anyway, I still love football and scream four letter words at my new flat screen TV as players fail to measure up.

So what does all that have to do with macro? It occurred to me that current dismal global macroeconomic performance can be explained by thinking about a football team. It is a pretty simple story. After a long season most players have at least several minor injuries that they endure. That is normal. What is more troublesome for a team, however, is when one of more of the key players --- the so-called stars – have significant injuries that either prevent them from playing or hamper their otherwise fluid and awesome performance. 

In such cases, it is next to impossible for that team to win against a competitive opponent. It is one thing for these players to be individually reduced – but even more importantly – it harms the many relationships among the players. The timing will be off between the hobbled QB and the pass receivers. With an injured running back, a split second slower start means the timing of the blocks may not allow for successful running plays. A hurt linebacker now needs a different kind of support from the safety.

Injuries to key players, therefore, hurt a team in many ways. 

So what is the coach supposed to do? The coach can try to inspire the players. The coach can give them a little energy pill in their Gatorade. The coach can change the playbook and the strategy. Those suggestions seem pretty lame. What the coach really needs to do is to heal the injured players. The only way to get the whole team back to its previous strength and efficiency is to get the key players back to full health. In the meantime other strategies might be somewhat helpful; but they won’t really solve the problem because the problem of team performance is really a problem of issues with one or a few players.

This is the challenge for policymakers around the globe. They pretend that we have macro problems. And therefore we use corrective macro solutions – like austerity or monetary stimulus. But the truth is that the problems in most places around the world since the last global recession derive from a few key sectors and not from anything really macro. It is easy to mistake the source of a problem. When a team fails to score a touchdown it seems like the whole team is the problem. But it is very likely that the failure to score was the result of one or two players' failures. The receiver missed the pass by an inch. The QB was tackled trying to pass because he was a tad slower and his blocking broke down.

The US knows it has failed to adequately address the financial and housing sectors. Europe knows it is sclerotic. Japan cannot hide its protectionist tendencies. China overbuilt its real estate.  Greece knows that the gyros market is in a glut. Venezuela, Russia and other oil-based economies know their oily issues. Today in 2015 we have major sectoral problems that are misinterpreted as macro. So Europe and Japan pour on the money. And then puzzle when it doesn’t solve their problems. We poured enough money into the US economy for it to be growing faster than the proverbial speeding bullet.  Yet we limp along too.

The world needs another coach – or at least a good trainer. The world is never going to experience decent growth again without attending to our sectoral issues in ways that foster healing and real growth. A pain pill won’t help. A band aid will only do so much. Macro policies will exacerbate bubbles. If we want growth and we want to help the middle class--- forget macro and get onto real cause and effect. Sounds crazy from a macro guy but a macro guy ought to be smart enough to know when macro is the problem – and when it isn’t. Now where is my JD?