Plus ça Change...
Boulevard du Temple, 1838, Louis Daguerre
One of the earliest photographs in history is of this street sometimes referred to as the Boulevard du Crime, the heart of popular theatrical life in Paris during the July Monarchy (1830-1848) and later demolished by Haussmann. The pantomimes, melodramas, and acrobatics of this period thrived along with the street life, corruption and darkness immortalized by Charles Baudelaire in Les Fleurs du mal (Flowers of Evil).
I found myself diving back into this atmosphere for a few hours while pondering the famous epigram above, which I discovered to have been birthed in this milieu by the pen of writer Jean-Baptiste Alphonse Karr in a July 1848 political essay. This revolutionary year ended in a new constitution and the creation of the short-lived Second French Republic. Plus ça change, plus c'est la même chose (the more things change, the more they stay the same).
It’s a phrase that has lost none of its relevance. And I believe that’s because it is an accurate statement on human nature, as well as an acknowledgement of the cyclicality of history. The following chart is what initiated these oblique musings in the first place.
Source: This Time is Different: A Panoramic View of Eight Centuries of Financial Crises, Carmen M. Reinhart and Kenneth S. Rogoff, Working Paper 13882, NBER
There are in reality two types of sovereign default: the straightforward type in which a sovereign stops paying its debts, and a softer, more insidious type via inflation or currency devaluation that reduces the burden of debt in real economic terms. Often, one type accompanies or leads to the other. This time, it is clear which type of default has been chosen. And it is all the more insidious as the entire developed world is moving through the process of currency devaluation in parallel. As the end of the current debt supercycle approaches, real interest rates have reached historic lows, and even high yield corporate bonds now yield negative real rates. Tens of trillions of dollars in debt is being written down slowly. It is simply yet another age of financial repression; these charts go back eight centuries. Plus ça change…
I’ll leave you with the following image from Baudelaire’s The Vampire 1
Alas! both poison and the knife
Contemptuously said to me:
"You do not deserve to be freed
From your accursed slavery,
Fool! — if from her domination
Our efforts could deliver you,
Your kisses would resuscitate
The cadaver of your vampire!"
translated by William Aggeler