A slight change in focus can produce a profoundly different understanding

The Millennials

The Millennials or generation Y refers to those reaching adulthood in the 21st Century. I never thought much about this generation until the phenomenon of Brexit and Corbyn. The Millennials are typically pro-Remain and Pro-Corbyn. The obvious contradiction reflects a form of cognitive dissonance that seems to plague this generation. When challenged on why they supported Corbyn when the Lib Dems offered a clear pro-Remain platform the answer is always ‘tuition fees’. There is little thought in this response because if there were they would realise that the Lib Dems were never in power. They were in a coalition and in coalition one must make compromises. The Lib Dems successfully moderated a harsh Tory programme but to do so they had to give up some sacred cows. The inability to accept this is a another sign of cognitive dissonance.

The Millennials stand in stark contrast to baby boomers. The latter worked hard and prioritized home ownership, family, and financial security. They were self-reliant and tended to accept that sacrifices were necessary for a better future. These features are present irrespective of politics. Attitudes to wealth and work-life-balance veered more to wealth. The baby boomers, certainly in the UK, are a lucky generation. They have enjoyed an unusual period of peace and prosperity. Life expectancy has increased markedly. Many have reached their Shangrila of a ‘comfortable retirement’. They are the parents and the grandparents of millennials. The contrast is stark.

Millennials are confronted with relatively low pay, high accommodation costs, and high unsecured debt levels. They blame the baby boomers, their parents, their grandparents. But what the baby boomers see is the cognitive dissonance. The Millennials seem to lack ambition in financial terms. Pursuing wealth is not fashionable. Taking jobs they deem unpleasant in order to earn a bit more is not consistent with their priority of work-life-balance. They like to do ‘socially useful’, creative jobs. Such jobs do not always pay well. So the Millennials often find themselves living at home or getting ‘early inheritance’ from the baby boomers. They don’t mind doing this (cognitive dissonance again) because of course the baby boomers, their parents, their grandparents, do not deserve this wealth. No one should have more wealth than they need. The attraction of Corbyn now makes sense.

The Millennials are fundamentally geared to a socialist political view. It is not an ideological conclusion born of deep study of history, sociology, and economics. It is a psychological outcome. In order to reconcile the discomfort of the cognitive dissonance generated by the desire to live a less stressed life and the consequent need to accept help from the baby boomers, they reject the validity of private wealth and reclassify the help as a right. The baby boomers do not deserve it. It is all their fault anyway.

The implication for future voting patterns is clear. The growth of life expectancy has slowed markedly (making insurance shares better value I should add) and the baby boomers will die. The Millennials are set to dominate the electorate. The socialist narrative that has taken root will be driving voting outcomes. Corbyn and Momentum are in the ascendancy. The only thing that can disrupt this is the EU debate and recognition that Corbyn is even more committed to Brexit than the PM. However, the socialist narrative seems to still hold sway and overwhelm the internationalist inclinations of the Millennials. The future of the Conservative Party is poor whatever happens.



The Skripal Affair

The UK government has placed the order to use a nerve agent to attempt to kill Sergei Skripal firmly within the Russian state. I have no problem believing this to be true. Of course, the UK government cannot publish the evidence for this conclusion in the interests of ‘national security’. Once again we are required blindly to believe our own government even though we know it would not hesitate to lie to us if it felt the lie was in the interest of ‘national security’, (you might like to think about this for a while). Still, the Skripal affair troubles me.

The Russian state had the means, motive, and opportunity to make an attempt on Skripal’s life (you can see I watch a lot of detective dramas). What bothers me is the clumsy nature of the attempt. Surely, the Russian state could have achieved a surgical assassination that did not put half of the hapless citizens of Salisbury at risk? The Russian state effectively left an arrow pointing to the Kremlin. The event has enraged the British public because the risk to British Citizens is tantamount to a terrorist attack. Russia has been restored to evil empire number one status. The cold war is back. Now this is interesting.

Prior to the Skripal affair there was suggestion of collusion between the Russian state (or at least, Russians) and right-wing elements in the west. Collusion between the Brexit camp and Russia. Collusion between the Trump camp and Russia. Such thoughts can now be put behind us because surely Russia is clearly the enemy. Moreover, it has highlighted clearly for us who is the real enemy within; Jeremy Corbyn. He had the temerity to hesitate to condemn Russia without all the evidence. So the media has wheeled out the obvious observation that Corbyn is a communist and used this to explain his refusal to automatically condemn Russia. This also bothers me. I don’t like Corbyn and I believe he is a communist but Russia is not the Soviet Union. Russia is anything but a communist state so why would Corbyn’s ideology bias him in their favour?

For 6 years of my career (albeit in two distinct tours of duty as it were) I worked for the European Bank for Reconstruction and Development. The is a supranational organization capitalised by some 60 or so states. The largest national shareholder, many are surprised to discover, is the USA. The role was to bring the market economy back to the former Soviet states and encourage growth and economic development in these states. It has been very successful, so successful that they recently expanded operations beyond former Soviet and Balkan states.

Russia today has much more in common with 19th Century USA than a communist state. It is a country of robber barons, obscene wealth, and inequality. It is not a place in which Jeremy Corbyn would be comfortable. It is thus odd that the UK media should be able to make this false connection between Corbyn and the modern Russian state and the public lap it up. Corbyn had a strong ideological link to the Soviet Union perhaps, but not modern Russia. We are being manipulated and the manipulation is not even that subtle.

So I have no problem believing Russia ordered the hit on Skripal. However, their reason for doing so now, and using such a clumsy tool, should be of concern. It is impossible to know what the motive might have been. However, we do know the outcome of the Skripal affair. First, there is the resumption of  a pseudo-cold war which distracts from the suggestion of collusion between Russia (or at least Russians) and right-wing movements in the west, notably the Brexit camp in the UK. Second, it has allowed the UK media to create a crude, false association between Corbyn and modern Russia. The intention is to discredit Corbyn but there may be unintended consequences. If the public are sufficiently enraged by the Skripal affair it may allow the removal of Corbyn and the return of a Remain-supporting New Labour. Now that would be interesting.

Language and Integration

The immigrant bashing continues with that old favourite, not speaking the language. How can you integrate if you do not speak the language? It is a good question and one I often ponder when I am in Paphos, Cyprus, listening to all the English immigrants (sorry, expats) chatting away in English and unable to speak any Greek ( or Turkish). Still, let us not let the marvellous English hypocrisy get in the way of a bout of immigrant bashing. I am particularly sensitive to this subject because my mother never learnt to speak English. She arrived in England in 1954 with me (a year old) and those of my siblings that were not already here. Fifty odd years later on her death she still did not speak English.

It did not hold me back much. I passed the 11+, went to grammar school, university, and even taught at British universities. Indeed the only practical outcome, apart from her own isolation within the Greek-Cypriot community, was that I and those close to her learnt to speak a form of Greek. Cypriot-Greek* is not what Athenians would regard as good Greek and they have tended to look down their noses at the Cypriots (who is looking down at whom these days I wonder). The latter have traditionally done their best to emulate ‘clean’ Greek, but recently the language of my mother has come back in vogue. Some have expressed surprise at my impressive command of Cypriot-Greek. Thank my mother.

The problem for many non-English speaking immigrants is not their unwillingness to speak English but their lack of literacy in their language of origin. My mother was illiterate. Educating girls is not popular in some cultures and this is why so many of the non-English speaking people in the UK are women. Curiously, what seems to be an immigrant problem (damned immigrants refusing to integrate again) is largely a gender problem. It is aggravated by the fact that women in many cultures still take the carer role and men go out to work. It is a lot easier to learn the language if you are exposed to it daily. My mother had 7 children and various add-ons and rarely left the house. By the time she could leave the house Hornsey Road was full of Cypriot-Greek speaking shops and so even shopping was not a pressure. Like Sajid Javid I spent much of my childhood engaged as a translator (often in embarrassing circumstances).

Integration is not a problem with immigrants. It is a problem with the host community. It is a two-way process. If the host community will not permit it then no amount of effort by immigrants will enable them to integrate. One of the problems is bilingualism. You cannot be English if you speak two languages. Even English people who have acquired a second language are treated with suspicion! The other problem is name and colour. People frequently remind me that I have an unusual name (oddly it is unusual even in Cyprus and Greece but this is not what they mean). When they ask ‘where are you from?’ they look visibly irritated if I say Golders Green. I am still asked if I have been home this year. The problem is not only the unusual name but the darker skin. You cannot be English if you are dark-skinned. Indeed there is much kudos to being ‘sensitive’ to the sun (though ginger people are still mocked).

These subtle forms of racial abuse (for this is what it is) often come from people who become very indignant if you accuse them of racism. But they are racist, and the purpose of the language is to place a barrier of entitlement between immigrants and themselves. They are more entitled than we, and best we do not forget it. Such is the power of language that often those of immigrant origin use entitlement language as well. It probably makes them feel more integrated.

The reality is that immigrants are typically desperate to integrate. If they are not learning English there is another explanation ( gender issues) and not lack of desire. Immigrants find themselves in a kind of limbo, not quite what they were and not quite what they are trying to be. No one wants to be in limbo and they all try hard to integrate. First generation may find it difficult but second generation integrate with ease, in so far as they are permitted. So let us stop using the fact that first generation immigrant women do not speak English as an excuse to bash immigrants for not integrating. Let us recognise the gender issues. Let us recognise the role of the attitude of the host community in creating barriers to integration. Let us stop treating ‘unusual’ names, skin colour, bilingualism, etc as excuses for subtle racial abuse. And English people permanently living in Cyprus, Spain, etc stop calling yourselves expats. You are immigrants so learn the language!

  • The Cypriot-Greek dilaect has a demotic grammar much like other Greek Island dialects but also contains many non-Greek words. I was watching a Flemish language programme yesterday and was surprised to hear the word βιτρίνα (vitrina) . It means shop window in both languages. Go figure! Cypriot-Greek contains words from all the nations that have occupied the Island, which is logical. But when did Belgium occupy Cyprus?

S&P 500: Correction or Crisis

There was a through the whole of 2017 a strong sense that a ‘correction’ was due. Now that something resembling a correction has materialised the debate has shifted to whether it is a correction or the start of a bear market. The answer is of course that no one knows and will only be fully clear in hindsight which is of no use to anyone. Moreover, from the point of view of investment strategy it is irrelevant and serves only to give the scribbler something to scribble about. So what do we actually know?

There has been an extended rally in the S&P 500. It has outperformed most other major markets in local currency terms. The rally has coincided with (been caused by?) and extended period of low-interest rates. It has encouraged short volatility investment strategies. The longer it has gone on the more complacent (desperate for yield) have become investors, and the greater the accumulation of short volatility trades. The prospect of rising interest rates and inflation has finally rattled the complacency and generated this ‘correction’. Why now? Same reason why a cumulative globule of water in a tap finally drips. No idea. One thing is certain is that once a tap starts dripping it does not stop of its own accord.

It is unlikely that short volatility investments have fully unwound so we can assume this ‘correction’ has some way to go. Fear is finally entering the system and countering complacency (and greed). Whether this ‘correction’ becomes a crisis rather depends upon the distribution of positions and the leverage associated with short volatility positions. Some people will find themselves wiped out and be surprised. Mis-selling claims will emerge as careless people try to blame someone else. Old dogs like me have seen it all before. The present situation most closely resembles the 1994 bond market collapse. Anyone remember inverse yield curve notes and power caps?

The important thing is that the immediate direction of stock prices at the moment has nothing to do with the economy, apart from central bank policy and inflation. It is largely to do with positions and expectations (fear). Central bank policy and inflation will feed the fear. In the past I have found that the only way to manage investments in these circumstances is to look at a chart. This is why I left you with one in my last blog. According to Finance academics (which I once was) charts contain no useful information. In my view they need to get out more. So let us revisit an updated monthly price chart of S&P 500 futures.

US 500_20180213_08.17

What do we know? The market is overbought. It has accelerated away from the long-term uptrend. The candle for February is signalling a top. The 0.382 retracement of the move from 1814 (the last time the price touched the uptrend) to 2877, the high, is 2471 and we have not yet got near it. The 50% retracement is 2346, and long way lower than 2644, the price of the futures as a I write. The price could fall as far as 2065 and still be consistent with the long term uptrend. The ratio of the high, 2877, to 2065 is 1.393. That would be a hell of fall and certainly qualify as a bear market. Yet the long term uptrend would be intact. Where does this leave us?

The ‘correction’ is not over. Whatever triggered the correction, the markets own momentum will take us down further. The 50% Fibonacci retracement of 2346 seems the minimum move to expect before this correction is over. I would assume this to be the likely outcome and plan accordingly. We can discuss it again if and when we get there. Of course we could just turn around and rally and make a new high from here. But I doubt it.

Beans and The Bear Market

Bear markets are popular with proprietary traders. You would imagine that proprietary traders have no bias. The important thing is that they get the direction, or lack of it, right over the relevant time horizon. In my first opportunity at proprietary trading ( I was still also head of research is those poorly regulated days) I discovered a marked preference. My education was at the hands of a colleague (and often drinking partner) nicknamed Beans. The name arose because of his often reference to Soya Bean futures as an indicator of the direction of bond prices. These were days of inflation and the CRB Index was closely followed as a leading indicator of (US) inflation. Soya Beans had a material weight in this index.

Coming from an analytical background I initially struggled with this love of the bear market. Indeed I had a preference for bull markets. This was just as well as this was the beginning of the great bond bull market which may only now be completing. Fortunately, markets do not go in a straight line so there were plenty of opportunities for my colleague to earn his corn, so to speak. It was some years however before I full grasped this preference for the bear market amongst professionals.

The prime emotion in trading is fear. Bear markets reek of it. Market price action becomes wild when fear takes over. If you have ammunition it is an easy environment to make a lot of money quickly by shorting stuff. Moreover, volatility is typically much higher in a bear market, both implied and realised, and this creates repeated opportunities and makes it easy to correct mistakes.

The second most important emotion is greed. Fear never quite leaves one but it can become overwhelmed by greed. In bull markets greed grows with every uptick. It sucks latecomers in at high prices. The longer the bull market continues the more likely greed will morph into complacency, overconfidence, and arrogance. You will hear expressions like ‘it is different this time’ and a lot of waffle about ‘fundamentals’. The reality is that when a price chart starts to resemble a parabola you ought to be careful. At this juncture a lot of people will convert the chart to log form and linearize it. If you were not using a log chart in the first place this is a form of denial.

The bear market trader does very poorly in bull markets, snatching a meagre living from periodic pull backs. The bull market sucks in more and more investors taking more and more risk, often unaware of the degree of risk that they have. When the bull market ends they are no match for the ravenous bears that come out of hibernation to feed on their folly. Has this bull market ended?

The striking aspect of the equity market correction of the last few days has been the fact that it was visibly led by the Vix index. Someone started buying a lot of (implied) volatility. The Vix index spiked and this triggered selling of the S&P 500. Other equity markets followed. The S&P 500 had become parabolic and so it was vulnerable to a sharp correction but getting the timing right on that is always tricky. The result is such a sharp correction in both volatility and price as to scare the pants off many. Is it a correction or the start of a bear market? No one really knows ex ante. I will leave you with this chart. However, there are a lot hungry bears so it could be painful before the bull market resumes.

US 500_20180207_14.50

The Economics of Migration

There is a popular myth that migration displaces natives from jobs and depresses pay. Economic dynamics are very complex and rarely do such simple linear processes apply. It all depends upon causality. If an economy that is in some steady state equilibrium is suddenly confronted with a large number of unexpected migrants (an exogenous shock) then the initial impact may well be to displace locals and depress pay levels. The long run outcome is as likely to be a return to a steady state equilibrium at higher levels of employment and similar real pay levels. The idea that long run growth is proportional to population growth and productivity seems to emerge from most steady state economic models. The point of interest in this blog however is that migration flows are not normally exogenous shocks but rather endogenous responses.

An endogenous migration flow is one motivated by domestic economic need. Labour shortages are normally the root cause. Otherwise profitable industries may find it difficult to fill jobs with the right skills at the right price. Labour flows in and makes such industries viable. The result is to also increase opportunities for native labour that would not have been there had these industries not been viable. Migration flows in these circumstances do not displace native labour but increase job opportunities. The corollary of this is that restricting migration in such circumstances will destroy rather than enhance native jobs. If native labour had been available in the first place the endogenous demand for foreign labour would most likely not have materialized.

Restricting endogenous motivated migration flows will have one of two effects. It may render certain industries unviable and thus destroy native jobs. Or it may motivate investment in automation and AI as labour substitutes. This will boost productivity, itself a welcome outcome, but may also result in a net reduction in native employment, at least in the short-term. Automation, once embarked upon, displaces all jobs and not just those previously taken up by migrants. The idea that restricting migration flows will enhance employment opportunities for natives is thus not rooted in any economic logic.

The single market requires free movement of labour. The logic is that as regions (states) experience excess demand for labour it moves to meet this demand. The single market facilitates endogenous migration. The flows are of course two-way and labour could flow from the UK to other regions. Leaving the single market will artificially restrict labour flows. If the UK economy needs labour then, as explained in paragraph 3, restricting flows will destroy jobs for natives. If the UK economy does not need the flows or has surplus labour it will lose the opportunity for this labour to move to more dynamic EU regions. The surplus labour could depress UK wage rates further at least in the short-term. The economics of migration do not support simple linear thinking except in special circumstances and even then only in the short-term. Brexit will hurt those that voted for it the most.

Farage and a Second Referendum

There has been universal surprise at Nigel Farage conceding the need for a second referendum. Perhaps the hypocrisy of his original position was weighing on his conscience. Before the referendum he had argued that a 52-48 result against leaving would not be sufficient to stop his demanding another referendum. Indeed, the nature of democracy is the right to change one’s mind. However, I do not think Farage is motivated by conscience. What would the second referendum ask?

The question might be to accept whatever May’s government has negotiated or a hard Brexit. It may be that Farage fears that pressure would be brought to bear on the government to agree a deal that includes much Farage dislikes (e.g. freedom of movement) and that he prefers a clean, painful, break through a hard Brexit. It is then logical and self-serving to argue for a second referendum. It is not about leaving in this case but how we leave.

It is unclear whether Farage would support a second referendum on whether we leave. I suspect not so it is best to wait for the question before one celebrates. Why would he support a referendum on whether we leave? Perhaps he feels there would be a greater majority for leaving and thus greater legitimacy. Perhaps he feels he could move the debate away from freedom of movement and onto more fundamental issues. Despite protestations of leavers it is clear it was immigration ‘what won it’. This presents the UK as a xenophobic insular country of ‘little Britons’. Perhaps even Farage baulks at this legacy. But what are these more fundamental issues?

On May 29, 2016, immediately before the fateful first referendum I published a blog entitled, The Real Case For Brexit . The thrust of the argument was that whilst migration was an effective strategy for mustering support to leave the real case lies in the direction of the EU. In short, do we wish for ever closer union culminating in political union? The immediate next step for the UK would be to join the eurozone. The UK cannot have a permanent opt-out.

The eurozone, as presently structured is an accident that already happened. The cost has been high and has emphasized that within an integrated EU, German hegemony rules. It is conceivable that with the UK a full member of the EU and eurozone that the system could be reformed and German hegemony diluted. It would however require the UK to fully embrace the EU ideal and vision and with enthusiasm. To move forward without enthusiasm could be disastrous for the UK and not so good the EU. It might result in strengthening German hegemony.

German hegemony is a problem in two related areas; fiscal policy and attitude to inflation. It is a world in which balanced budgets and strict prioritization of price stability would prevail. In colloquial terms it is a world of constant austerity for some. Given the structure of the EU sovereign economies this would condemn many countries to constant suppressed activity and population outflows to the stronger economies. For those that find this hard to grasp just look at the UK, the position of London and the South-east in relation to the north and west, and then map onto Europe with Frankfurt, London, and Brussels as the epicentre. It is not pretty when some of the ‘north’ constitutes sovereign states ( Wales and Scotland?).

Staying in the EU means either embracing full political union with enthusiasm or finding a more distanced political relationship albeit with close economic ties. Do we want to be British or European? This is the true referendum question. The first referendum revealed that the old, poorly educated, and those that identify as ‘English’, preferred to be British. The young, the educated, and those that do not identify as ‘English’, displayed a preference for being European.

The Norwegians confronted this issue some time back. They decided they wanted to be Norwegian and accepted a deal that allowed political autonomy but close economic ties. Of course, close economic ties have a price. Membership of the single market requires freedom of movement. The question the UK should ask the EU is what is the closest economic relationship we can have without conceding freedom of the movement? This is the best deal we can hope for. The alternative is hard Brexit (no relationship on exit) or staying in and becoming Europeans.

There are thus two questions that a referendum needs to answer. Do we wish to be British or European? If it is put this starkly I suspect ‘British’ will win. This leads to the second question; do we prefer the best deal available without freedom of movement or hard Brexit? In this case I suspect we will choose the best deal. I am assuming no compromise on freedom of movement. If compromise is possible then it is simply the Norwegian arrangement.

Farage may have worked this out and realised that his own abuse of the immigration issue has confused the situation and that this might backfire. If he can restate the choices in the above form he may get a stronger backing and a less disunited UK. If he can facilitate this process it might not do him any harm personally. After all, his conversion does coincide with his not getting a Knighthood and being visibly peeved by this.

The Currency Overlay

If you look at 12 month equity index changes you will notice wide disparities. The S&P 500 increased by 18.87%. Add the dividends and your return, in USD, is just over 20%. Nice. The FTSE 100 increased by 7.97%. Add dividends are you returned just over 10%. Not bad but half that of the US index return. Or is it? It rather depends upon your base currency. Sterling appreciated by 9.34% against the USD over the same period. This means that the USD return on FTSE 100 was about 20%, much the same as the USD return on the S&P 500. Put differently, in sterling terms, the return on the S&P 500 was about 10%. International investing is as much about currency as it is equity performance.

The returns do not always equalize of course. The Nikkei increased by 19.1% over the last year which we can also round to 20% or so with dividends. Sterling appreciated by only 5.39% against the Yen. The sterling return from investing in the Nikkei would have been around 5% better than the FTSE 100. Sterling depreciated against the euro and this would have enhanced any returns arising from European equity investment. This is not a new phenomenon. My career has centered this currency overlay issue. It is however far more complex than one might imagine and I suspect that the average punter has little idea how currency effects returns.

If you are invested in a managed fund then you may have to search quite extensively to find information on currency overlay. The manager may have a great reputation as a stock picker but who is managing the currency risk? More important how is it being managed?  It is just as important as choice of market and stocks yet rarely informed or discussed.

There are two types of risk. Translation risk is the most obvious and refers to the impact of currency changes when you come to value your foreign currency asset and dividend in your home currency. Economic risk refers to the impact of currency on relative economic performance which feeds directly into the value of the asset in the currencies of operation. Global corporations may have multiple currencies of operation. When you invest in a global corporation you are investing in multiple economies influenced by many currencies.

The FTSE 100 is an interesting index in this respect. Around 58% by value of this index is accounted for by 16 companies all of which are global in their operations. The total global influence is clearly much higher. This means that the performance of this index is dominated by the world economy and not simply the UK economy. It is not a bad vehicle for gaining exposure to global economic activity except in one respect; it contains little exposure to the high technology world of Apple, Amazon, and Facebook. Nevertheless it is not a bad place to start.

The FTSE 100 involves no direct translation risk (all companies are listed on the LSE and quoted in sterling) but there is indirect translation risk. Earnings of many corporations are in foreign currency so corporate earnings translation will be affected by currency. This may partly explain the relatively poor index performance as earnings may have been depressed by sterling strength vis-a-vis the USD. It is hard to deconstruct because each corporation has its own currency overlay strategy as well as different distributions of operations over the world. The point is even the FTSE 100, a UK index, involves currency risk for the sterling based investor. It is hard to avoid.

So what is the best way to proceed in this complex situation? The answer, as always, is keep it simple and minimize costs. If you want a global equity portfolio that includes exposure to the Facebook’s of the world then a low-cost fund that tracks the MSCI global should do the trick. This will however leave you directly exposed to sterling moves. Alternatively you could include the FTSE 100. There is no direct sterling exposure but as we have seen there is indirect translation and economic exposure. More important, FTSE 100 does not offer exposure to exciting technology stocks. Maybe some combination of the two would work.

One of the reasons I was motivated to write this blog was that when I looked at two funds in which I invest, neither of which hedges risk, I noticed that my 12 month return on the UK fund is 11.42% and my return on the global fund is 11.35%. Moreover, when I check the FTSE 100 chart I like what I see even though I find it hard to explain in terms of the component stocks. The FTSE 100 is making new highs. Despite the unexciting component structure it may offer a solid, low-cost, investment that is not bounced about by the vagaries of sterling in quite the dramatic manner of other investments. It may also be telling us something about the global economy. Steady positive global growth is on the cards favouring global banks, mining stocks, oil stocks, alcohol stocks, tobacco stocks, consumer staples, mobile phone companies, insurance, and big pharmaceuticals. Not the most ethical group of stocks mind you…

FTSE 100_20180101_09.50


The Transgender Debate

The transgender debate is one of the most interesting and potentially productive debates. Transgender arises when an individual identifies with a gender other than the one normally associated with the biological form. The two standard or normal forms are male and female. A transgender woman is someone with a male form that identifies as a woman. A transgender man is someone with a female form that identifies as a man. The two standard forms are not the only possibilities. Moreover, the identification says nothing about sexual orientation. A trans man or woman need not be heterosexual or indeed have any recognisable sexuality. It can become complicated so the focus here is on standard physical forms and the gender identities, ‘man’ and ‘woman’. Sexuality is not of interest.

Transgender is not a new phenomenon but recognition is recent. The issue is controversial but the premise of this blog is that it is quite possible for someone to feel like a man trapped in a woman’s body and vice versa. This is presumably a special case of an out-of-body experience to which so many aesthetics aspire. Their idea is that by deprivation and meditation one can achieve a plane of existence outside of the body. It would seem transgender people are born with this (involuntary) capacity. They experience existence as woman (man) inhabiting a man’s (woman’s) body.

The notion that we can experience a consciousness outside of our physical form is rather exciting. Neurobiology is busy explaining consciousness as electrical impulses and chemical flows in the physical brain. They can map brain activity, and can influence our state of consciousness by altering the chemical flow across synapses. The thrust of neurobiology is to root us ever close to our physical existence. The idea of a conscious experience that transcends our physical existence is thus rather interesting.

Neurobiology may eventually be able to explain transgender experience in terms of electrical impulses and chemical flows. It must however also explain why these configurations arise in a specific individual and not another individual. Is consciousness generated by electrical impulses and chemical flows or does it generate them in order to guide the body? Perhaps it is an interactive process. Deprivation and meditation may create physical conditions in the brain that generate the out-of-body experience much like fasting and prayer may generate spiritual experience, another form of out-of-body sensation. Neurobiology has yet to explain, however, why individuals seek these out-of-body experiences. What motivates the aesthetic or pious believer? Nothing it seems motivates the transgender person. It is just the way they experience life.

Transgender people offer us insights that people have always sought through discipline, deprivation, and meditation; an opportunity to understand the relation between our conscious experience and our physical existence. If society can embrace the concept of transgender then it has embraced the separation of body and consciousness. The two must be connected but understanding in what way may well enhance our experience of living. Transgender people are born with a form of (involuntary) separation and alienation. Normalization is not only important to those that are born this way. It may  also contain the clue as to who and what we all are.



Freedom of Expression

There is a popular myth that Freedom of Expression is an unrestricted human right enshrined in a convention on Human Rights, the constitution etc. It is not. The myth arises because there is a tendency to focus on the first paragraph of, say, the European Convention on Human Rights (which has nothing to do with the EU). Article 10 of the ECHR states:

1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

There is of course a second paragraph.

2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.

The right to Freedom of Expression carries with it responsibilities. Moreover, the Convention recognises the right of the state to exercise such responsibilities on our behalf by defining the limits of FoE. The extent of the right to FoE clearly will vary from society to society and this is entirely consistent with Article 10. So at best we have a restricted right to FoE. After completing a course on this subject I came away with the conclusion that FoE is only unrestricted in so far as it gives offence. You have the right to say things that others find offensive. Not quite what most people understand.

So philosophically, to how much freedom of expression should we aspire? The first thing to note is that paragraph 2. implicitly requires the protection of a democratic society. So if someone wishes to speak of removing democracy (and presumably removing the right to freedom of speech) the democracy is entitled to deny this person the right to express the view. There is a problem with this. Not all democracies are the same. Someone may wish to restrict some democratic freedoms without removing democracy in its entirety. The essence of democracy is that the citizens of the state have some peaceful mechanism whereby they can change the governing order. How easy it is to do so can vary widely without removing the possibility.

The second thing to note is that expression is a source of power. This was mentioned in my previous blog on defining norms. Narratives are the mechanism whereby norms are removed and replaced. Narratives are not simply about law, facts, and logical reasoning. They appeal to and stir emotions. It is through their grip on emotions that they can exercise the most power and reform what people internalize as norms.

Finally, an idea, once expressed, is validated. This may sound odd but it is the real problem with freedom of expression. It does not matter how outlandish, horrific, or offensive an idea might be, once expressed, it is legitimized in the sense that it has to be debated and refuted. If you agree to debate an idea then you validate it. You recognize it as within the set of ideas that people can hold and that it is amenable to logic and facts. You give it oxygen to thrive and flare and stir emotions.

This is one of the main weaknesses of social media. I regularly receive retweets of objectionable ideas. They are retweeted by those that disagree and believe they are refuting these ideas and ridiculing them. In practice they are feeding oxygen to these ideas and extending them to a wider audience. They are validating the ideas by acknowledging them and attempting to refute them. These people are part of the problem but see themselves as part of the solution.

My response has been to block tweets from those that express toxic ideas ( e.g. Farage and Trump) in order that their toxic ideas do not appear on my feed, retweeted by the well-intentioned but misguided people who I follow. I do not listen when toxic people speak and do not repeat their ideas. Imagine a world in which Trump, Farage, and others of their ilk are denied oxygen for their ideas not by banning but simply by a refusal to repeat, retweet, or debate. The existing approach, repeat, refute, and ridicule, is clearly not working. Might be worth a try.


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