It’s not Funny

The triad of anaesthesia is sedation, muscle relaxation and analgesia (“pain relief”, of which alcohol is one). Mr. Economy arrived at the emergency room in 2008. He had been drinking too much “analgesia” and drove his car into a wall, heavily graffitied with a four-letter word: “STOP”. On arrival, central banks sedated him as they prepared for surgery. They also gave him pain killers – and the market loved it. Financial assets inflated and became pain killer addicts. Mr. Economy woke up last year and found himself in rehab. It’s been tough. The medical staff seem to believe he can hold out until at least 2024 but he’s not so sure. The voice of Buzz Lightyear keeps echoing in his head, “to infinity, and beyond”.

Do you remember that time you just couldn’t supress a grin escalating into a giggle that burst out into uncontrolled laughter? You kicked yourself afterwards for being that childish. For over two centuries, philosophers and psychologists have dug into the human psyche to tease out the reasons why we laugh. One longstanding proposition has been the theory of incongruity. Human beings find humour in realising something through the juxtaposition of incompatible concepts or incongruent ideas. A “negative interest rate” is an example. If you didn’t find that humorous, then I’m afraid nothing in financial markets will do. It doesn’t get better than that. This happened just the other day. You actually had to pay the bank to take your money – and – at the same time, pay the bank to lend you money. Heads I win, tails you lose. Beautiful.

Banking isn’t always that profitable a profession though. The credit crisis of 1772 started when two London banks collapsed and set off a ripple of panic across England, Scotland, and the Dutch Republic. Central banks stepped in to calm the markets. And you thought Ben Bernanke was original. It’s almost poetic that another discovery was made in that same year – nitrous oxide. Yes, that’ll be “laughing gas” as chemist Humphry Davy would aptly name it, realising that he started giggling after inhaling the agent. This discovery ushered in the modern era of anaesthesia.

Then came Ether. No, not the cryptocurrency – the flammable liquid that was an improved form of anaesthetic. Originally used as a recreational drug to get high at parties (called “Ether Frolics”), William Morton discovered its efficacy as a form of anaesthesia after partaking in an illuminating frolic session. After Ether, came cocaine (seriously). Cocaine started being used as a form of local anaesthesia in the 1850’s. Its usage ranged from eye surgery to treating toothaches. Cocaine would later be replaced by synthetic compounds due to its addictive properties. That is to say, authorities soon realised that numbing pain came with trade-offs, and therefore had limits.

Someone who gave limits a great deal of thought was none other than Albert Einstein. He is quoted as saying, “Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.” Hold that thought. The 2008 credit crisis saw central banks print money - they called it “Quantitative Easing” or “QE” because “printing money” would be far too humiliating (and honest). This caused the price of money to collapse to zero and encouraged the world to borrow, a lot. In fact, far too much. Now consider that after nearly a decade and a half of sustaining crisis level measures, implementing regulatory capital requirements, and stress testing banks – what panic ripples through financial markets in March 2023? Answer: two banks collapsed. Wait, that sounds familiar. Remember that thought you were holding?