17 August/18 August 2019 ★ FT Weekend 5Careers such as Bryan Magee’s are rare.
He made a living as, sometimes simulta-
neously, a writer, broadcaster, univer-
sity lecturer and member of the British
parliament.
Magee, who has died at the age of 89,
had an unusually broad range of inter-
ests. He published 23 books, including
two novels and a volume of poetry, sev-
eral works of philosophy, a study of the
composer Richard Wagner(whom he
revered), and a memoir of his upbring-
ing,Clouds of Glory: A Hoxton Childhood,
which won the JR Ackerley prize for
autobiography in 2004.
Magee’s penultimate book,Ultimate
Questions, published in 2016, returned
to fundamental philosophical puzzles
about the nature of reality and con-
sciousness that obsessed him for most of
his life. This metaphysical curiosity set
in early. “Between the ages of about nine
and 12,” he wrote, “I was in thrall to puz-
zlement about time.”
The young Magee nursed these preoc-
cupations in a bedroom he shared with
his sister, Joan, three years his senior, in
a flat above a shop in Hoxton, east Lon-
don, where he was born in 1930. He was
very close to his father, a working-class
autodidact from whom he inherited hislove of Wagner and Shakespeare. How-
ever, his relationship with his mother
was altogether more difficult. “She was
a loveless person,” he told an inter-
viewer last year. “She had no affection
for her children.”
The pivotal moment in Magee’s child-
hood came in 1941, when he won a Lon-
don county council scholarship to
Christ’s Hospital, a boarding school in
Sussex. He described his time there as a
“many-sided preparation for life, for
which I have been abidingly grateful”.
Before going up to Oxford in 1949,
he did national service in the intelli-
gence corps. Magee was sent to Austria’s
border with Yugoslavia, where his job
was to interrogate people trying to cross
the frontier illegally. Many of those he
questioned turned out to be Yugoslav
secret agents. “For an 18-year-old it was
heady stuff,” he said.
Although Magee remained interested
in the big philosophical questions, he
arrived at Oxford to study history. He
tried to persuade the head of his college
to let him read music (then his
“supreme love”), but was told that he’d
lose his scholarship if he changed sub-
jects. So he stuck to history, while mak-
ing friends with undergraduates whowere reading philosophy. He was also
active in the Oxford Union, the under-
graduate debating society, rising to
become its president.
William Rees-Mogg, a university con-
temporary and later editor of The
Times, recalled that “there was always a
question of whether he was basically at
heart an intellectual or someone inter-
ested in public life”.
Magee deferred any attempt at set-
tling that question by taking a second
undergraduate degree in philosophy,
politics and economics, which he com-
pleted in a year. He wrote later that he
was “trained in Oxford philosophy with-
out ever subscribing to it”.
The dominant style in Oxford in the
early 1950s was so-called ordinary lan-
guage philosophy. Magee regarded the
“enthronement of common sense”
implied in this approach to be an “intel-
lectual catastrophe”. And the books on
philosophy he went on to write for a
broad, non-academic audience were all
rooted in a belief that the questions that
had preoccupied philosophers down the
centuries were real and pressing.
In 1953, Magee took a teaching job in
Sweden, where he met and married
Ingrid Soderlund. They had a daughterbut the marriage quickly collapsed. “It
was a fairly disastrous period in my life,”
he recalled. He never remarried.
He returned to Britain and worked in
television as a scriptwriter and reporter,
while also trying to get elected to parlia-
ment as a Labour MP. After abortive
runs in the 1959 general election and a
by-election the following year, he was
eventually elected as MP for Leyton in
east London in 1974.
He became disenchanted by Labour’s
lurch leftwardsand defected to the
Social Democratic party in 1982, before
losing his seat in 1983. While sitting as
an MP, Magee continued to write and in
1978 he also made a television series for
the BBC,Men of Ideas, which brought
him considerable public acclaim.
At the age of 62, Magee devoted him-
self to writing full time. And he was pro-
lific, publishing “more than half [his]
best books” after becoming an old-age
pensioner. His final book,Making the
Most of It, was publishedlast year. It
ends with these lines: “It is terrible and
terrifying to have to die, but even the
prospect of eternal annihilation is a
price worth paying for being alive.”Jonathan DerbyshireObituary
A polymath in
thrall to the big
philosophical
questions
Bryan Magee
Philosopher, writer and broadcaster
1930-‘There was always a
question of whether he
was basically at heart an
intellectual or someone
interested in public life’
Bryan Magee was prolific, publishing
23 books on a broad range of topicsMarkets yield to recession fears
T
he nearest thing the global
economy has to a dooms-
day clock ticked a little
closer to midnight this
week, triggering fear across
financial markets. On Wednesday, the
US yield curve—the slope formed by
the interest rate paid by Treasury bonds
of various maturities — turned upside
down for the first time since the sum-
mer of 2007, with the US government
now paying less to borrow for 10 years
than two years.
Although seemingly obscure, the
yield curve enjoys a cult following
among investors as the leading market
forecaster of recessions. Normally,
countries should pay less to borrow
money for shorter time periods. When
this relationship flips it has historically
been an omen of economic downturns
—presaging every US recessionsince
the second world war.
This week’s inversion rattled global
stock markets even though the move
was widely forecast,extending the FTSE
All-World index’s decline in August to
over 4 per cent asinvestors fret that the
countdown to the next recession may
alreadyhave begun.
“The yield curve is one of the best sig-
nals out there,” says Robert Michele,
chief investment officer at JPMorgan
Asset Management. “Its accuracy is
eerie.”
The yield curve is essentially a reflec-
tion of the distilled wisdom of millions
of investors, from individual savers,
financial advisers and small Midwest
banks to Middle East sovereign wealth
funds, Asian insurers, European pen-
sions and Wall Street money managers.
If the economic outlook dims they tend
to look for safety and buy government
debt, pushing up their price and crimp-
ing their yields. But when long-term
yields fall below short-term ones —
which are more closely linked to the
interest rates set by central banks — it
indicates that investors foresee a down-
turn and imminentinterest rate cuts.
President Donald Trump weighed in,
blaming the Federal Reserve’s slowness
in lowering interest rates for the
“CRAZY INVERTED YIELD CURVE!”.
Former Fed chair Janet Yellen down-
played the inversion,predictingthat the
US economy would avoid a recession,
but conceding that “the odds have
clearly risen and they’re higher than I’m
frankly comfortable with”.
The yield curve’s ability to forecast
recessions is hotly debated, but the
inversion indisputably reflects the bond
market’s mounting fears over a global
economic slowdown. The IMF last
month trimmed its forecasts for global
growth to 3.2 per cent for 2019 — which
would be the lowest in a decade.
Some economists think even this is
too optimistic. Trade tensions between
the US and China, the world’s two
economic superpowers, have been
ratcheted higher since the IMF’s latest
forecasts. TheGerman economy, the
European powerhouse, has contracted,
adding to the market alarm.
The most eye-catching manifestation
of the anxiety isbonds trading with neg-
ative yields, with many countries — and
even some companies — in practice now
paid by creditors to borrow. The phe-
nomenonpicked up speed over the
summer as expectations have risen that
central banks will again have toaggres-
sively ease monetary policy.
Many investors predict that this move
would prevent a slowdown from becom-
ing a recession, and argue that panic
over the yield curve is overwrought.
Nonetheless, a sense of gloom is
spreading across markets, with few
signs that the trade warwill disappearremained untouched by the phenome-
non. But with the Federal Reserve cut-
ting interest rateslast month and expec-
tations of more aggressive cuts to come,
even the once unthinkable — negative
yielding US government debt—has
become at least feasible.
“There is international arbitrage
going on in the bond market that is help-
ing drive long-term Treasury yields
lower,” former Fed chair Alan Green-
span said this week. “There is no barrier
for US Treasury yields going below zero.
Zero has no meaning, beside being a cer-
tain level.”
There is still some way to go before US
government bond yields dip into nega-
tive territory. But this week’s yield curve
inversionboth reflects and exacerbates
the current bout of nervousness sur-
rounding the economic outlook.
There are many ways to measure the
shape of the yield curve, such as com-
paring 30-year Treasuries to five-year
ones, or 10-year yields to three-month
Treasury bills — another popular meas-
ure that turned upside-down earlier this
year. But the two-year, 10-year yield
curve inversion that happened this
week is particularly popular as an eco-
nomic omen among many investors.
“Although other measures of the US
yield curve have progressively inverted
over the last few quarters, [the] 2s-10s
inversion is the one that worries me
most,” says Jim Reid, a senior strategist
at Deutsche Bank. “It has the best
record for predicting an upcoming
recession over more cycles than any of
the others.”
Adding to the pessimism, on Thurs-
day, the 30-year Treasury yield went
below 2 per cent for the first time ever,after China accused the US of “a severe
violation” of their previous trade agree-
ment, and said that it “will have to take
the necessary countermeasures”.Losing its predictive powers?
Many investors argue the gloom is over-
done. The global economy is slowing,
and trade wars are a major risk, but
aside from the bond market’s amber
warning light there are few concrete
signs that a recession is looming.
That is especially true in the US,
where jobs are still being created at a
healthy clip and American household
spending — arguably the single-biggest
engine of the global economy — remains
robust. Data released on Thursday indi-
cated thatindustrial production con-
tractedin July, but retail sales were
much stronger than expected.
“People are extrapolating from weak-
ness in manufacturing to services and
consumption, and I just don’t buy it,”
says Rick Rieder, global chief invest-
ment officer of fixed income at Black-
Rock.
Some analysts say the yield curve’s
predictive powers are overstated or
malfunctioning, because of the sheer
amount of post-crisis bond-buying by
central banks and pension funds. The
Fed argues that itmay beartificially
depressing long-term bond yields and
making the curve a less accurate harbin-
ger of recession.
Moreover, the shape of the curve has
been a poorer predictor of recessions
outside of the US. Even there, the span
of time between inversions and reces-
sions has become progressively longer
over the years. The post-second world
war average lag between inversion andrecession is about five quarters, but the
curve inverted nearly two years ahead
of the 2008 financial crisis.
Ashish Shah, co-chief investment
officer for fixed income at Goldman
Sachs Asset Management, says equity
markets are far from pricing in a poten-
tial recession, despite thejitters. He
argues that sagging bond yields are
more reflective of the muted inflation
outlook and expectations that central
banks will once again do whatever it
takes to buttress the global economy.
“The bond market’s takeaway is that
if growth slows then central banks will
act preemptively,” Mr Ashish says. “And
if it doesn’t then they won’t act aggres-
sively to raise rates.”
For central bankers at Jackson Hole —
and investors — the question they may
have to confront iswhether the global
economy’s monetary superpowers have
the ability to forestall any future reces-
sion, having already used up much of
their firepower.
European Central Bank president
Mario Draghi seems determined to
launch one last big stimulusbefore he
leaves the institution in October. But
eurozone interest rates are already neg-
ative and the ECB isbutting up against
limits on how much government debt it
can buy. Other central banks have also
floored the monetary pedal, and while
the Fed has some room to trim rates, it
may not have enough to counteract a
trade war-triggered global downturn.
“I don’t think there is in aggregate
enough central bank firepower left,” Mr
Michele says. “If it wasn’t for the trade
war we might have a chance of averting
a recession, but at this stage all we can
do is try toease it.”FT BIG READ. GLOBAL ECONOMY
The yield curve enjoys a cult following among investors as the leading market forecaster of recessions. An
inversion this week struck fear across stock markets. But does it still have the same predictive powers?
By Robin Wigglesworth
any time soon. The longer the tensions
linger, the bigger the toll on the global
economy, and if they rise further then
all bets are off, investors warn.
“We think it’s a manageable conflict,”
saysBob Browne, chief investment
officer at Northern Trust. “But if it
becomes unmanageable and we have a
full trade war, then that’s a risk that
even the Fed can’t avert.”Treasuries below zero?
The world’s central bankers meet next
weekon the outskirts of Jackson Hole, a
rural town in Wyoming, for the annual
monetary policy extravaganza thrown
by the Federal Reserve’s Kansas branch.
The scenic location, first selected to
appeal to former Fed chair Paul Vol-
cker’s love of fly-fishing, has become
one of the premier venues for a select
group of policymakers, academics and
investors to discuss the biggest eco-
nomic issues. The slowdown and ways
to address it will be prominent for those
attending this year’s symposium.
Nearly $16tn worth of bonds are now
trading with sub-zero yields, or about
27 per cent of the global total, according
to Deutsche Bank. Negative interest
rates in Japan and Europe, coupled with
the central banking bond-buying
splurge, are big contributors to the odd
trend of creditors paying borrowers. But
the growing fear over the global eco-
nomic outlook is also a big factor, ana-
lysts say, with investors willing to pay
for the security of safer debt.
“No one has a playbook for negative
rates,” Mr Michele says. “It’s uncharted
territory, and that’s what makes central
banks so uneasy.”
The US Treasury market has thus far‘No one has
a playbook
for negative
rates. It’s
uncharted
territory,
and that’s
what makes
central
banks so
uneasy’Market
participants
take in the news
that the US
government will
now pay less to
borrow for 10
years than two
years
Eduardo Munoz/Reuters‘We think
it is a
manageable
conflict. But
if we have a
full trade
war, that’s a
risk that
even the Fed
can’t avert’
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