The Familiar Terrain of 'Uncharted Territory'

The current market turmoil has found its favorite catchphrase

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The clichéIn early May, Treasury Secretary Timothy Geithner extended the debt ceiling deadline to August 2. Bloomberg Businessweek quoted Matthew Zames, chairman of the Treasury Borrowing Advisory Committee, who wrote Geithner saying, "Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the U.S. Treasury and overall financial markets in uncharted territory, and could trigger another catastrophic financial crisis." The U.S. did not delay making any payments, and yet Zames' prediction of "uncharted territory" seems, if one reads the news at least, to have come about. In this month's London Review of Books, John Lanchester wrote, "I’m told that the cliché du jour in financial markets involves reference to 'uncharted territory'." Indeed, in July, as Europe's own debt crisis grew worse, Erik Berglof, chief economist at the London-based EBRD, was quoted in Bloomberg saying "We are in uncharted territory. The source of the contagion seems to be in worse shape."  Then in the aftermath of the U.S. debt ceiling crisis and subsequent credit downgrade, Barclay's Capital predicted gold would exceed $2,000 an ounce next year. "We believe three key pillars are set to strengthen and drive prices further into uncharted territory, breaching the $2,000 per ounce milestone," they wrote in a report.

Where it's from: The phrase's literal origin is with nautical explorers who used charts and maps to record their discoveries. If one found territory that was "uncharted," i.e. not on the map, he had gone somewhere no one else had ever recorded. And though Lanchester notes that its use is reaching cliché proportions, it is a phrase that has always existed in financial parlance. In 1985, for instance, a UPI report stated "For the fifth consecutive week, the stock market surged past previous records to close up in uncharted territory." (Happier times, those 1980s.)

Why it's catching on: This is in many ways a time of new (and unhappy) discovery in the world of economics. Lanchester cites factors from quarterly GDP data to the S&P downgrade of U.S. debt. "A major contributor to this sense of unchartedness was the decision by the ratings agency Standard and Poor’s to downgrade US government debt from AAA to AA+ status," he writes, both because it has tarnished the reputation of "the currency we earthlings prefer to use," and in part because it reveals a new and dangerous element to Republican politics. "They know that everyone else knows that they truly don’t care about the consequences of their actions, and the prospect of the Tea Party wing being in government is truly frightening." In short, it is the financial data and the political news that are sailing us into waters we've not yet seen before.

Why else? We might be in "uncharted territory" for more reasons than stats and politics though. Lanchester notes that out of the Great Depression came the entire modern field of macroeconomics. A similarly cataclysmic event may be forcing us to do a rethink of the theories that came out of the last one. As Edward Muller and Larry Zimpleman wrote in The Wall Street Journal last week, "Virtually everyone knows the U.S. and global economies are in serious trouble. We're in uncharted territory. Having tried conventional macroenonic tools, we are now out of ways to stimulate growth in private-sector demand, which is flat and shows no signs of picking up any time soon." What they mean to say is that traditional thinking by economists may not be enough to answer our problems, or as Mark Thoma put it more bluntly in The Fiscal Times, "What caused the financial crisis? Don't ask an economist."

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