John Mauldin: Anne Elk’s Theory On Brontosauruses by Mauldin Economics

Though they reunited this past month for a series of concerts at London’s O2 Arena, the cast of Monty Python last assembled onstage together at London’s Drury Lane Theatre a staggering 40 years ago.

As they took to the stage at the O2 in early July, the surviving members of perhaps the most famous comedy troupe in history (sadly, Graham Chapman died in 1989) boasted a combined age of 357.

As expected, neither of these facts deterred people from flocking to see the Pythons; nor, it has to be said, did the occasional “senior moment” on stage prevent rapturous critics from garlanding them with rave reviews.

The centrepiece of the show was, of course, the famous “Parrot Sketch” in which John Cleese returns a dead Norwegian Blue parrot to “the very boutique” from whence it came “not ’alf an hour ago.”

The sketch, written by Cleese and Chapman in 1969, took aim at the British fondness for euphemism (particularly as pertains to death) and (somewhat ironically, given the subject) became one of the most mimicked pieces of comedy ever conceived.

The YouTube video I linked to above (just in case there is still anybody out there who HASN’T seen the “Parrot Sketch”) has 4.5 million views alone.

However, buried in the Python’s canon of work lies another sketch which proved far less popular amongst the viewing public but which found favour amongst (of all groups) the scientific community.

The sketch, “Anne Elk’s Theory on Brontosauruses,” appeared in the 31st episode of Monty Python’s Flying Circus, which was entitled “The All-England Summarize Proust Competition”; and it featured Chapman as a television interviewer and Cleese (in drag) as Miss Anne Elk, a paleontologist, who was in the studio to discuss her new, ground-breaking theory on the afore-mentioned dinosaurs.

What followed when Elk was questioned about her theory is classic Python:

Presenter: You have a new theory about the brontosaurus.

Anne Elk: Can I just say here, Chris, for one moment, that I have a new theory about the brontosaurus?

Presenter: Uh… Exactly…

Very long pause

(prompting) What is it?

Anne Elk: Where?

Presenter: Your new theory

Anne Elk: Oh! What is my theory?

Presenter: Yes!

Anne Elk: What is my theory that it is? Well, Chris, you may well ask me what is my theory.

Presenter: I am asking.

Anne Elk: Good for you. My word yes. Well Chris, what is it, that it is, this theory of mine. Well, this is what it is. My theory, that I have, that is to say, which is mine… is mine.

Presenter: Yes, I know it’s yours! What is it?

Anne Elk: … Where? … Oh! This is it.

Starts prolonged throat clearing

Anne Elk: (clears throat) This theory, which belongs to me, is as follows… (more throat clearing) This is how it goes… (clears throat) The next thing that I am going to say is my theory. (clears throat) Ready?

Inevitably, after such a prolonged build-up, the payoff is predictable in that Elk is clearly stalling in order to avoid explaining her theory for as long as possible; but, eventually, she is forced into laying it out for the whole world to see:

Anne Elk: My Theory, by A. Elk (Miss). This theory goes as follows and begins now:

All brontosauruses are thin at one end; much, much thicker in the middle; and then thin again at the far end. That is my theory that is mine and belongs to me and I own it and what it is, too.

… and in that instant, she is exposed for what she is: a fraud.

The scientific community adopted Anne Elk’s theory on brontosauruses to describe any scientific observation which is not actually a theory but rather a minimal account; and that sobriquet — it seems to me — merits far broader application and acceptance.

Lately I seem to be constantly reminded of Anne Elk everywhere I turn, as the world descends into chaos and those charged with running it (at least officially) stumble from pillar to post, relying on the public’s buying into whatever they spin in order to press their agenda.

We see it in the rush to demonize Vladimir Putin for the MH17 tragedy, along with everything else that remotely touches Russia; we see it in the one-sided reporting of events in the Middle East; and we see it in the broad-brush strokes painted across the China canvas when assumptions are made about what is happening inside the political hierarchy that runs the Middle Kingdom.

However, the one place it is glaringly obvious (and has been for a number of years) is in the talk emitting from the mouths of the world’s central bank governors.

Now, I am no great fan of Putin; nor do I feel able to confidently choose sides between various factions in the Middle East — mainly because I find it impossible to take what I read in the mainstream media at face value and therefore come to what I would consider a well-informed opinion — but the beauty of central bankers is that they hold press conferences and release detailed minutes of their meetings which, if anything, throw perhaps too much light onto their deliberations, operations, and machinations for anybody’s good — least of all their own.

July 26th, 2012: Anne Elk’s Mario Draghi’s Theory on Preserving the Euro:

This theory, which belongs to me, is as follows… (more throat clearing) This is how it goes… (clears throat) The next thing that I am going to say is my theory. (clears throat) Ready?

We think the euro is irreversible. And it’s not an empty word now, because I preceded saying exactly what actions have been made, are being made, to make it irreversible.

But there is another message I want to tell you.

Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

Now, unlike Anne Elk’s (brackets, “Miss,” close brackets), Draghi’s theory — though in effect every bit as toothless should his bluff ever have been called — was taken at face value by a gullible public; and disaster was averted (though, along with the gullibility, there was also an implicit explicit bribe put carefully in place — buy bonds of bankrupt countries, and we’ll make sure you don’t lose money).

Many of you will probably not remember what the edge of the abyss looked like, so here are a couple of reminders — just for old times’ sake:

greece spain italy Anne Elk

The chart above shows the yields on 10-year government bonds for Greece’s $242 billion economy; Spain’s $1.35 trillion economy; and the behemoth, Italy’s $2.17 trillion economy through 2011, going into the unveiling of Draghi’s Elk Theory plan and beyond.

Due to scaling issues, the plot for Greece is on a separate scale on the right-hand side of the chart; but, if you look carefully, you’ll see that yields on its 10-year bonds peaked at 37% in early 2012 and, despite some serious jawboning on the part of EU politicians, were still at 28% in July when Draghi cleared his throat.

Remember those days? Europe was teetering on the edge of oblivion, and each day saw the chances of a disorderly unwind of the euro increase to the point where even some of the more staunch pro-Europe voices began to waver in their certainty about its future.

Writing somewhat presciently a few short weeks before Draghi unveiled his Elk Theory, plan, The Economist laid out the bind perfectly:

(Economist): Even the single currency’s die-hard backers now acknowledge that it was put together badly and run worse.

Greece should never have been let in. France and Germany rode a coach and horses through the rules designed to prevent government borrowing getting out of hand. The high priests of euro-orthodoxy failed to grasp that, though Ireland and Spain kept to the euro’s fiscal rules, they were vulnerable to a property bust or that Portugal and Italy were trapped by slow growth and declining competitiveness.

A break-up, many argue, would allow individual countries to restore control over monetary policy. A cheaper currency would help match wages with workers’ productivity, for a while at least. Advocates of a break-up imagine an amicable split. Each government would decree that all domestic contracts—deposits and loans, prices and pay—should switch into a new currency. To prevent runs, banks, especially in weak economies, would shut over a weekend or limit withdrawals. To stop capital flight, governments would impose controls.

All good, except that the people who believe that countries would be better off without the euro gloss over the huge cost of getting there. Even if this break-up were somehow executed flawlessly, banks and firms across the continent would topple because their domestic and foreign assets and liabilities would no longer match. A cascade of defaults and lawsuits would follow. Governments that run deficits would be forced to cut spending brutally or print cash.

Has anything changed in Greece since July 26th, 2012? Well, let’s see:

Unemployment?

Anne Elk

Nope.

GDP?

Anne Elk

Well, technically, I guess you could say it rose, since it only fell 4% last year instead of 7% — it depends on how you define improvement, I guess. Either way, though the rate has slowed, the Greek economy spent its sixth straight year in contraction in 2013.

So no real improvement in Greece then.

What about Spain?

Anne Elk

It’s a different chart from the Greek one, I promise you. It just LOOKS the same. In fact, the Spanish headline unemployment rate has actually plummeted to 25.4%, so… hooray for Europe!

GDP?

Anne Elk

Well, let’s be charitable here, shall we? Ermmmm… (prolonged pause)… (clears throat)… Hey, Spain ain’t Greece!

Of course, the official GDP growth forecast for Greece for 2014 is… drumroll… +0.6%. And Spain? Well that would be growth, too — to the tune of +1.1% — but this is the work of the European Commission, a body whose website makes available the following upbeat reports for your downloading pleasure:

Spring 2014 European economic forecast: Growth becoming broader-based

Winter 2014 forecast European economic forcast: EU economy: recovery gaining ground

Autumn 2013 European economic forecast: EU economy: Gradual recovery, external risks

Spring 2013 European economic forecast: The EU economy: adjustment continues

Winter 2013, European economic forecast: The EU economy: gradually overcoming headwinds

What does the more-broadly-growing/gradually-recovering/ground-gaining/headwind-overcoming EU economy look like in graphical form?

Funny you should ask. I just happen to have the chart right here, courtesy of Eurostat:

Anne Elk

{cough}.

Look… as we’re doing this, we can’t leave out Italy — and, what with Renzi’s resounding victory for the pro-EU lobby and the demise of Silvio, things there must be on the up, right?

Anne Elk

Wrong.

And when we move to unemployment, well, things just go from bad to worse. As you can see in the chart below, youth unemployment in Italy is still rising relentlessly (it currently stands at 43%), and headline unemployment is also steadily climbing, suggesting that Italy has yet to reach its “bang moment”:

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