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Things That Make You Go Hmmm: Deus Ex Machina

The tiny island of Salamis in Greece was the birthplace, in 480 BC, of one of the three great tragedians of the Classical Athenian era. Aeschylus and Sophocles were the other two, but the third
The tiny island of Salamis in Greece was the birthplace, in 480 BC, of one of the three great tragedians of the Classical Athenian era. Aeschylus and Sophocles were the other two, but the third member of that legendary triumvirate was not only the author of some 92 plays but also the subject of one of the earliest knock-knock jokes ever recorded:


Who’s there?


Euripides who?

Euripides trousers? You menda dese trousers.

OK, so the Ancient Greeks in general (and Athenian tragedians in particular) were hardly renowned for their jokes; and certainly, modern-day Greeks have painfully little to laugh about as their country slides headlong into a depression, thanks to political intransigence amongst European politicians; nonetheless, Euripides was a man who made his mark on the theatrical world and, despite his reputation as one of the great tragedians, he is widely acclaimed for having pioneered dramatic devices that were later adapted to comedy:

(Wikipedia): Euripides is identified with theatrical innovations that have profoundly influenced drama down to modern times, especially in the representation of traditional, mythical heroes as ordinary people in extraordinary circumstances. This new approach led him to pioneer developments that later writers adapted to comedy, some of which are characteristic of romance. Yet he also became “the most tragic of poets”, focusing on the inner lives and motives of his characters in a way previously unknown. He was “the creator of … that cage which is the theatre of Shakespeare’s Othello, Racine’s Phèdre, of Ibsen and Strindberg,” in which “… imprisoned men and women destroy each other by the intensity of their loves and hates”, and yet he was also the literary ancestor of comic dramatists as diverse as Menander and George Bernard Shaw.

Euripides’ most famed works are familiar to anybody who studied the classics in school.

Heracles, The Suppliants, Helen, Medea, and Cyclops have all kept schoolchildren from having fun spellbound for hours, but there is one dramatic device with which Euripides became associated that has led to even his most celebrated works being heavily criticized by dramatic scholars (and by that I don’t mean scholars with a flair for the dramatic, but rather those who study… oh, you know what I mean) down through the ages.

That dramatic device is known as deus ex machina, which literally translates as “god from the machine”.

A deus ex machina plot device is something that solves a dramatic problem through the sudden (and often improbable) intervention of an outside agent in the form of a character, ability, object, or event.

(Wikipedia): Depending on how it’s done, it can be intended to move the story forward when the writer has “painted himself into a corner” and sees no other way out, to surprise the audience, to bring a happy ending into the tale, or as a comedic device.

The first recorded usage of the term deus ex machina is widely acknowledged to have come in Horace’s Ars Poetica, in which he warns aspiring poets never to use such a device to solve plot complexities. Horace makes reference to the usage of a primitive crane (mechane) by which the ancient Greeks used to lower actors playing gods onto the stage at opportune moments in order to resolve situations for which David E. Kelley himself could not have come up with a satisfactory plot twist.

Anybody not see where I’m going with this?

The massive global build-up of credit and leverage, fueled by cheap money, that was allowed to flourish in the years before the events of 2008 was as dead-end a plot progression as one could possibly imagine; and once the collapse post-Lehman manifested itself, it was clear that the only possible way to advance the story without having to go through an inevitable, even more painful second act, was through the use of a deus ex machina. And lo and behold, up stepped the world’s central bankers, all of whom were blissfully happy to be lowered by crane onto the stage with instructions to employ whatever means they felt necessary — no matter how improbable these might seem to the audience — to move the story quickly towards the happy ending so craved by those in attendance.

Of course, one of the beauties of such dramatic devices is that, human nature being what it is, the audience is nearly always complicit in their willing suspension of disbelief — which, incidentally, is another term coined by a writer, this time Samuel Taylor Coleridge, who concluded, quite rightly, that:

… if a writer could infuse a “human interest and a semblance of truth” into a fantastic tale, the reader would suspend judgment concerning the implausibility of the narrative.

Perhaps these writer fellows are onto something.

Certainly, since the events of 2008, the “audience” has been only too happy to accept as perfectly normal many situations that previously would have had them stalking out of the theatre in droves.

I have covered many of these improbable situations in the pages of Things That Make You Go Hmmm… as well as in my various presentations, but the key point bears reinforcement: we are living in the midst of a gigantic laboratory experiment with all the attendant possibilities of something going BANG!

The more I ponder the situation in which the world finds itself as we approach the fifth anniversary of the Lehman bankruptcy, the more it is apparent to me that the deus ex machinae being dropped into each and every market around the world right now by our central banks, are dangling from a very rickety crane indeed.

To continue reading this article from Things That Make You Go Hmmm… – a free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment Management in Singapore – please click here.

The Fed model compares the return profile of stocks and US government bonds.