Could bond funds break the market?

The Bank of England worries about a sell-off
GOOD generals know that the next war will be fought with different weapons and tactics from the last. Similarly, financial regulators are right to worry that the next crisis may not resemble the credit crunch of 2007-08.

The last crisis arose from the interaction between the market for mortgage-backed securities and the banking system. As investors became unsure of the banks’ exposure to bad debts, they cut back on their lending to the sector, causing a liquidity squeeze. Since then, central banks have insisted that commercial banks improve their capital ratios to ensure they are less vulnerable.

Might the next crisis originate not in the banking system, but in the bond market? That is the subject of a new paper* from the Bank of England. The worry centres on the “liquidity mismatch” between mutual funds, which offer instant redemption to their clients, and the corporate-bond market, where many securities may be hard to trade in a crisis. The danger is that forced selling, to return money to investors, leads to big falls in bond prices, creating a feedback loop.

If that concern seems fanciful, think back to the summer of 2016, when British mutual property funds had to suspend redemptions in the wake of the EU referendum vote. Fund managers simply could not sell properties fast enough to pay off their investors.

The corporate-bond market is a particular concern because it is much less liquid than the equities market. That liquidity has fallen in recent years, because banks have become less willing to act as market-makers. This reluctance is rooted in the regulations imposed after the last crisis, which require banks to hold more capital.

The Bank of England’s study focused on European mutual funds that own investment-grade bonds (the safest category). Since 2005, the worst month for redemptions in this sector occurred in October 2008, when outflows reached the equivalent of 1% of assets under management each week. The sell-off was accompanied by a rise in bond spreads—the gap between the yield on investment-grade bonds and that on government debt—of around a percentage point.

Some of that increase was obviously caused by a deterioration in the economy—investors realised that bond issuers were more likely to default. But the bank reckons that around half the shift was the result of a decline in liquidity. In other words, bond investors demanded a higher yield to compensate them for the difficulty they might face in selling their holdings.

The bank reckons that, if a 1% outflow of mutual-fund assets happened today, then European investment-grade spreads would rise, for liquidity reasons alone, by around four-tenths of a percentage point. That may not sound much, but it is around a third of the average spread since 2000.

What if the sell-off is greater than it was in 2008? After all, near-zero rates on cash must have pushed a lot of investors into corporate-bond funds in recent years. Some of those investors may be using bond funds as “rainy day” money and will thus be reluctant to sit tight if their savings are losing value.

Others could step in to buy the bonds. Long-term holders like pension funds and insurance companies are obvious candidates to do so, although they tend to be slow to react. Hedge funds are more nimble bargain-hunters but they often depend on financing from the banks, and that may not be available in a crisis.

Finally, the banks themselves could step in, but they face capital charges on their market-making activities. The moment could come, the bank suggests, when “dealers reach the limit of their capacity to absorb those asset sales”. This would be the “market-breaking point”. And that stage could be reached when redemptions equal 1.3% of net assets of corporate-bond funds—in other words, only 30% higher than during the 2008 crisis.

A sell-off in corporate bonds ought not to be as damaging as the mortgage-related crisis of 2008.

Investors don’t tend to use borrowed money to buy such bonds, and the big asset-management companies don’t back funds with their own capital. Corporate bonds also comprise only a small part of most portfolios. But it could still be traumatic if bond funds need to be suspended. That could undermine retail investors’ confidence in the liquidity of the mutual funds on which many depend for their retirement income. The bank is right to be alert to the risks.

* “Simulating stress across the financial system: the resilience of corporate-bond markets and the role of investment funds”, Financial Stability Paper No 42

Southeast Asia: The Sum of Its Parts


The Association of Southeast Asian Nations turns 50 this year, and at no point in its history has the region it represents been more attractive to outside powers or more indispensable to the global system than it is today. The 10-member bloc’s combined gross domestic product is on pace to reach nearly $3 trillion. It receives more investment than China, the country in whose shadow Southeast Asia has historically lived, and boasts a humming manufacturing sector manned by low-cost workers. Its position gives it stewardship over some of the world’s most prolific trade routes and makes it strategically valuable to navies vying for control of the increasingly crowded waters of the Western Pacific. It has become the front line in the competition between the United States and China. It is globally relevant in the fight against terrorism. 

And yet Southeast Asia is best described not as a coherent region but as a loose affiliation of disconnected states, economically disjointed, physically separated by hostile border regions and, to varying degrees, indifferent to the problems of their neighbors. With no central leadership, the region cannot execute a common strategy, act decisively in times of crisis or project power in any meaningful way. Vast economic disparities and divergent strategic interests wrought by geography tend to undermine collective attempts to redress these problems. 
And so ASEAN struggles to become more than the sum of its parts, all but powerless to shape a global system in which it is becoming a more important part. Their fates will, to different degrees, depend on how outside powers use them as they compete for regional influence. The following report explores why this is so and explains how the region will respond to the coming challenges it cannot escape. 
Separate but Unequal
The defining feature of Southeast Asia, historically as today, is geography. The region’s countries pockmark shipping lanes that link Northeast Asia’s exporting powerhouses — China, South Korea and Japan — to consumer markets in Europe and North America and to their resource suppliers in the Middle East.
Through its waters pass trillions of dollars in trade, if not always so easily: The region is riddled with chokepoints that, if blocked, would ruin economies such as China’s that rely almost entirely on exports for growth. This, along with the strategic value of the region’s island nations, all but guarantees a long-term presence of the world’s naval superpower, the United States. Peripheral powers Australia, India and Japan are also keen to secure their interests amid the rising competition in this space — and they are developing the ability to do so. Vast as Southeast Asia may be, it’s starting to feel a lot smaller to the countries that call it home.
The encroachment by foreign powers only increases the need for Southeast Asian nations to act in concert; after all, it’s harder to push around a 10-member bloc than it is one small country. But these nations have always struggled with uniformity, thanks largely to the division their geographies engender.

Southeast Asia can be divided into two main regions: the archipelagic region and the continental region. Archipelagic Southeast Asia encompasses the Philippines, Indonesia, East Timor and part of Malaysia. The internal incoherence of these countries is obvious. The Philippines consists of more than 7,000 islands. Indonesia consists of more than 17,000. The two halves of Malaysia are separated by roughly 400 miles of water. Though major islands like Luzon, Borneo, Java and Sumatra are home to fertile coastal plains that produce robust, relatively homogenous population centers, they are beset with extreme subregional disparities and ethnic fissures, as are the rest of the region’s countries. The Philippines, for example, has nearly 200 ethnolinguistic groups. Indonesia has around 350.

Continental Southeast Asia, which encompasses the countries of Indochina and the Malay Peninsula, may not be divided by water but it is no less fractured. Its defining feature is the Himalayan foothills that sweep through the region from the Tibetan Plateau. What these mountains lack in size they make up for in density and tropical inhospitality. Kingdoms took root in fertile river valleys and deltas and matured into the political and economic heartlands of today’s states. But the rugged borderlands between them have often been ill-defined and contested, marked by impenetrable terrain and home to ethnic minority groups that have time and again proved adept at resisting central control.

In both regions, the fringes of most states are constituted by swathes of largely ungoverned space given to black market activity, statelessness and rebellion. These areas have historically been subject to foreign exploitation. They allowed colonizers to weaken the resistance of the region’s feudal rulers and became battlegrounds between the Japanese and the Allied powers during World War II. Ethnic militias turned into well-armed U.S. or Soviet proxies during the Cold War. Southeast Asian history has left a legacy of artificial borders, shattered power structures and still-unsettled civil conflict — all of which drive modern states apart. It also created economic disparity: During the Vietnam War, U.S. bombing laid waste to Vietnam, Laos and Cambodia, but U.S. aid gave Thailand a lasting economic leg up on its war-torn neighbors.

The geopolitical landscape of Southeast Asia continues to undermine the control of central governments, which have been conditioned to mistrust foreign powers as well as one another. Consider Thailand. It antagonizes Myanmar by giving sanctuary to Burmese separatist groups along its western border. It chafes Malaysia when it shelters ethnic Malay-Muslim rebels in the far south. Cambodia, in turn, irks Thailand for stoking political divides in the restive east. Then there is Myanmar, which is extremely vulnerable to China in its northeast and, to a lesser extent, to India in its west. Indonesia, for its part, harbors long-held suspicions about Australia’s ability to exploit ethnic separatist movements in far-flung regions like West Papua. (Jakarta accused Canberra of as much during East Timor’s independence process.)

With so many separatist movements and border disputes, countries of the region tend to be preoccupied by land-based threats. They have prioritized army and air force development accordingly – a curious trend in a predominately maritime region – while neglecting the more expensive endeavor of fielding a modern coast guard or navy. Some countries are beginning to attune themselves to the necessities of their environment, but doing so is a long-term and costly project. Only Singapore, ever the outlier in Southeast Asia, has the resources and legacy fleet needed to meet its maritime imperatives. But Singapore is a small city-state, unable and unwilling to guarantee security for the entire region.

Whatever strategic value these states get from their geography is betrayed by the divisions that same geography creates. Divisions have hindered the development of the infrastructure – particularly east-west road and rail links between the mainland states – needed to unlock the region’s trade potential. It would need to spend some $1.5 trillion on infrastructure annually until 2030 to sustain its economic growth momentum, according to the Asian Development Bank. But even if the funds were available, integration is elusive in Southeast Asia. Countries are too busy consolidating control, and too reluctant to forge deeper ties with their neighbors, to build difficult, multilateral frameworks for military, political or economic cooperation. They defer almost invariably to their own judgment.

This creates a number of practical problems for regionwide cooperation and integration. On security issues, Southeast Asian nations need to act collectively, now more than ever, to manage criminal and terrorist networks that exploit the region’s lawless fringes. But there is little evidence to suggest they are setting aside their differences for the sake of collective security. The Philippines, Malaysia and Indonesia have proved reluctant to jointly address militancy and piracy in the Sulu and Celebes seas. Similarly, their reluctance to address more insidious long-term threats, including the depletion of offshore fisheries and the degradation of the Mekong River system, sows the seeds for future conflict.

On economic issues, Southeast Asian nations have often balked at the idea of reducing protectionist policies and of breaking down barriers to the free movement of labor, both of which contravene the region’s comparative economic advantages. Establishing the ASEAN Economic Community – which means to reduce internal trade barriers, streamline infrastructure investments and mutualize regulations – is a notable step forward. But here, too, progress has been incremental at best; many states have erected informal barriers that offset the gains made by the community. Continued progress remains vulnerable, moreover, to setbacks during periods of stress induced from the outside, whether by powerful states or by market forces.

Going Their Own Way

Naturally, the geopolitics of Southeast Asia shapes how the region engages with the global system — and how it engages with the major powers vying for influence over it.

The region’s states typically interact with the global system and outside powers individually. Take their relations with China for example. Most countries have negotiated with China bilaterally on issues over which they would appear to have shared interests – upstream control of the Mekong River and territorial disputes in the South China Sea, to name just two – affording Beijing the opportunity to nearly always negotiate from a position of strength. At annual summits, ASEAN members have famously struggled to form a united stance on Chinese assertiveness in the region, evidenced by the toothlessness of joint communiques on the South China Sea dispute.

Their struggle is due partly to the founding principles of ASEAN itself. Central to ASEAN’s founding charter is a zealous commitment to consensus and non-interference, but the group’s members have wildly different interests, as most countries do. The group’s stance on China can be as strong only as its most pro-China member will allow it to be. Naming and shaming wouldn’t change Chinese geopolitical imperatives, so members shouldn’t forfeit Chinese investment by voting against China, or so their thinking goes.

Their struggle is also due to the realization that a collection of small states will inevitably be at a strategic disadvantage compared to a powerful state, which benefits from a monopoly on force and the ability to act quickly and decisively in the face of a crisis. To form a united strategy on China, one ASEAN member would have to carry the bulk of the costs, subsidizes efforts to address the vulnerabilities of weaker members, and ensure bloc-wide compliance. No Southeast Asian country could do that anytime soon, even if it wanted to. On the most paramount issues of the day, ASEAN member states appear to have little choice but to go their own way.

These countries are nearly as passive when engaging the international system. They have neither the intent nor the means to solve their internal problems by expanding outward (as China does), so they have little choice but to rely on outside powers for investment, consumer markets and the security of their export routes. When they do wade into broader geopolitical competitions, they try to do so omnidirectionally. Their histories as vassal states or proxy groups have bred in them a healthy skepticism of working with outside powers, not to mention a wariness of binding alliances, so they are careful to balance these powers – never relying too much on one and, where possible, playing them off one another. The Philippines, for example, is poor and weak but has become singularly important to the balance of power in the Western Pacific. Under President Rodrigo Duterte, Manila is courting aid, investment and security assistance from a range of powers. Vietnam, rightly more worried about China’s rise than any country in the region, has been rapidly building its navy with Russian ships, cultivating military and energy ties with India and accelerating a political rapprochement with the United States. Just last year, the government in Hanoi opened its strategic naval port at Cam Ranh Bay to any foreign navy that wants to stop by. Its willingness to undertake the politically complicated reforms required to join the Trans-Pacific Partnership illustrated its imperative to hedge against economic reliance on the Chinese.
New Landscape, New Stresses
For more than a decade following the end of the Cold War, most ASEAN states thrived despite their individual limitations and their collective limitations in ASEAN. Vietnam’s departure from Cambodia in 1991 marked the end of a major military confrontation between regional states, and the U.S. departure from Subic Bay in the Philippines the following year punctuated a shift in global attention away from the region. With the Chinese still largely focused inward, with communist insurgencies across the region withering from the loss of outside support, and with the U.S. still guaranteeing maritime trade even from afar, Southeast Asian states were generally free to tend to their own internal affairs and gorge on the low-hanging fruits of a newly globalized system. Low-cost manufacturers like Cambodia and Vietnam rode global economic currents to newfound prosperity. Middle income states like Thailand and Malaysia, reaping the gains of Western infrastructure aid during the colonial era and the Cold War, made themselves vital links in global auto and semiconductor supply chains. Oil producers such as Malaysia, Indonesia and Brunei were buoyed by a decade of high prices. Singapore positioned itself as an indispensable banking center and shipping and refining hub – emerging as the steady pendulum that makes East Asian commerce tick. A lot of people got breathtakingly rich.

A tourist boat sails past the stone islands of Halong Bay in Vietnam. PHILIPPE LOPEZ/AFP/Getty Images
Prosperity can paper over deep-seated geopolitical challenges, but it cannot suppress them forever. The Asian financial crisis first brought these challenges back to the fore in 1997, laying bare Southeast Asia’s vulnerabilities to rapid changes in global finance. The 2008 global financial crisis, likewise, showed just how reliant the region had become on distant markets and how far it still had to go to tap into its internal trade potential. It triggered political upheaval throughout the region, disrupting entrenched power structures and unearthing the social forces that continue to preoccupy the region’s leaders today. In Southeast Asia’s ungoverned spaces, the fallout aggravated long-simmering local ethnic conflicts, emboldening separatist movements on the fringes and in the borderlands. Global terrorist networks, meanwhile, transformed otherwise local conflicts in Muslim-majority areas to regionwide problems that demanded joint solutions that afflicted countries either would not or could not devise.

With the United States distracted in the Middle East, China started to assert itself in places like the South China Sea. With its assertion came a surge in aid and investment that, for political and economic reasons, often proved irresistible to Southeast Asian governments, giving Beijing ample new means with which to sow regional divides. Meanwhile, Japan began removing legal constraints on its ability to develop its military.

When Washington’s attention eventually returned to the region, the Americans methodically laid the groundwork for a lasting presence there by assuming greater regional counterterrorism responsibilities and striking key basing agreements in Singapore and the Philippines. Then there was the Trans-Pacific Partnership, a U.S.-led multilateral trade agreement meant in part to help some Southeast Asian states avoid economic over-reliance on China. The TPP, however, has stalled, a victim of the global backlash against free trade.

In other words, the geopolitics of Southeast Asia was shaped just as much by the world’s foremost powers as they were by the land and water that constitute Southeast Asian territory. Nations in this region simply play too valuable a role in the competition between other countries.

Myanmar is a case in point. It is emerging from a half-century of international isolation. The country is valuable to China primarily as an outlet to the Indian Ocean basin. It poses a risk to China as a potential ally to India or Western powers and as a source of instability emanating from the ungoverned borderlands, where well-resourced rebel groups hold vast swathes of territory. To magnify its influence, secure its One Belt, One Road infrastructure projects and prevent ethnic conflicts from spilling over the border, Beijing is becoming more involved in the peace process between Myanmar’s government and the rebel groups Beijing has occasionally supported. Myanmar’s internal fractures and geographic position between India and China mean it cannot really determine its own fate; it can only try to position itself to benefit from the competition over it.

Like Myanmar, other nations of the region are adapting to new geopolitical circumstances, sometimes to the benefit of all. For example, regional spending on arms imports grew roughly 71 percent between 2009 and 2016, according to the Stockholm International Peace Research Institute, an independent firm that researches global security, with a growing emphasis on submarines and other maritime assets. The launch of trilateral patrols in the Sulu and Celebes seas lays the groundwork for more robust security cooperation. These nations are redoubling efforts to unlock internal flows of trade and investment through the ASEAN Economic Community and maintain a united front in negotiations over the Regional Comprehensive Economic Partnership, a China-led trade pact. They are welcoming Japan’s return as a military power – and therefore as a natural foil to China. The 2014 coup in Thailand and the peace processes in the Philippines’ Mindanao and Indonesia’s Aceh show Southeast Asian nations are trying to get their houses in order so that they are not so vulnerable to outside powers.

Still, these countries can’t escape their constraints. They can’t spend their way to military parity with China, nor can they police their vast maritime domains without U.S. support. As useful as the ASEAN Economic Community may be, capitalizing on what it promises would require trillions of dollars of aid or investment (and thus reliance on outside powers), not to mention untold amounts of political capital. China’s dominance of the Regional Comprehensive Economic Partnership could drown ASEAN economies with exports, weakening their prospects. Though regional states might welcome Japan’s remilitarization as a counterbalance to China, the prospect of a more assertive Japan nonetheless revives unhappy memories of other countries’ conflicts. And the unyielding geography of conflict-ridden regions makes sustained peace elusive.

A strategy that plays off all the outside powers is worthwhile, and for now all Southeast Asian states appear to be benefitting from the competition that strategy creates. Some, of course, are better positioned than others. Thailand and Malaysia do not see the competition as a zero-sum game and see no reason why accepting Chinese infrastructure investment and buying Chinese arms should jeopardize its U.S. security ties or access to Western consumer bases. In countries like the Philippines, however, where the stakes are higher, balance may prove harder to sustain in practice. Manila is too poor to reject Chinese aid and investment, and too weak and threatened to reject the United States. Given its geopolitical imperatives, Beijing will expect a return on its investment. Ultimately, in a crisis, the choice won’t be Manila’s to make.

The Sunni Arab Crisis of Leadership

By Kamran Bokhari

Now that the Islamic State has been forced out of Mosul, Iraq’s Sunnis and historical leaders appear to be coming out of the shadows. Iraqi Sunni leaders held a conference July 15 in Baghdad to discuss the future of their community. Attendees included political blocs, tribal chiefs, lawmakers, ministers and governors. Predictably, the Shiite political forces that dominate the government were concerned about the gathering. What is more significant, however, is that the meeting laid bare the divisions within the Iraqi Sunni community.

The incoherence of the Sunni Arabs, the majority population of the Middle East, is at the heart of the region’s chaos. Their rifts have only widened since the 2011 uprisings in the region and made space for the emergence of groups like the Islamic State. So long as Sunni Arabs are at odds with one another, the Middle East will be in conflict.

A Weakened Majority

Ever since the British created Iraq as a sovereign state in 1920, Sunni Arabs have dominated it.

First came the Hashemite monarchy, which was overthrown in 1958 and replaced with a republican regime dominated by the Baath Party and the military. Even though Shiites make up the majority of the population in Iraq, this Sunni-led system was able to survive because it suppressed religious politics of all kinds until 2003. The old order came tumbling down when the U.S. overthrew the Baath Party and Saddam Hussein.

Iraq’s Shiites and Kurds rose up in place of Saddam’s fallen regime to assume control of the new democratic order that Washington sought to build. Sunnis initially resisted the new republic, but the resistance was divided and collapsed upon itself. No longer united under the Baath Party, the Sunnis split along tribal, ideological and partisan lines. The discord allowed the Shiites to consolidate power, but another group benefited just as much: jihadists. Over time, jihadists grew in strength and in number to become the most potent force among Iraq’s Sunnis.

A member of the Iraqi federal police walks past his country’s national flag put up in celebration in the Old City of Mosul on July 8, 2017. AHMAD AL-RUBAYE/AFP/Getty Images

The jihadists were actually helped by the fact that the Shiites exploited the Iraqi Sunnis’ internal differences. Some Sunnis joined the Shiite-dominated political system, while others opposed it. Shiite efforts to marginalize the Sunnis undermined mainstream forces within the community. The predecessors to IS filled the vacuum, and the transnational caliphate project gained appeal among the Sunnis, pushing out the traditional political forces that were still hoping to be a part of the Iraqi national government.

The conditions were similar in Syria when popular uprising gave way to civil war. The rebels were mostly Sunnis but were deeply divided in every way except in their desire to topple Bashar Assad’s government. But an aspect of Syrian Sunni division that doesn’t receive much attention is that a significant number of Sunnis have not just refused to join the rebellion – they still support the Assad regime. This regime is dominated by the minority Alawite community, an offshoot of Shiism.

The jihadists in Iraq were well positioned to exploit the divisions among the Sunni majority in Syria.

Given that the Islamic State of Iraq (as the Islamic State was known as the time) was far more experienced and organized than any of the Syrian rebel factions, it quickly took control of territory in eastern Syria. By 2013, the Islamic State of Iraq had transformed the two neighboring countries into one battlespace; it changed its name to the Islamic State of Iraq and Syria to reflect the new reality. The following year, using its cross-border strategic depth and the disarray within the Iraqi Sunni community, the group seized Mosul, declared the re-establishment of the caliphate and renamed itself the Islamic State.

Who Will Lead?

Three years later, IS has been pushed out of Mosul and driven back into its rural desert habitat. This isn’t the first time the jihadists in Iraq were weakened, and yet they keep coming back – usually stronger. That’s because the social, political and economic conditions that allowed IS to emerge in the first place have not improved.

In fact, those conditions are poised to get worse. The Middle East’s religious and ethnic sects are growing ever more polarized. The cost of liberating Mosul has been that, for the first time in Iraq’s history, the mostly Sunni city is under the control of a mostly Shiite military force. It is only a matter of time before the Sunnis’ disdain for the Islamic State is redirected toward the Shiites who now occupy territory that has historically been theirs.

The Shiite-Sunni rivalry does a good job of explaining why Iraq, Syria and the wider region have an Islamic State problem. But the Shiite-Sunni struggle itself is the direct result of the Sunnis’ own divisions. After all, the Shiites are a minority in the Arab world. The only way the Shiites – led by an ethnically Persian power, Iran – could enhance their geopolitical fortunes is if the Sunni Arabs were weak and divided. They have been for a long time now, and it’s nearing a breaking point.

There is no Sunni Arab center of gravity. Saudi Arabia, the wealthiest player, is trying to offer leadership. But its source of power is being drained every day that the price of oil, the lifeblood of its economy, is low. Even if that was not the case, the Saudis have historically relied on the United States to guarantee their national security. How could they provide for regional security and protect Sunni Arab interests if they cannot protect themselves? The Saudi-led war in Yemen is a prominent example of Riyadh’s inability to impose order in its own backyard. But perhaps the most glaring example is Qatar, a tiny Gulf Arab state that refuses to subordinate itself to Saudi Arabia’s strategy for the region.

Egypt is the other major Sunni Arab power. It has a far more robust state than Saudi Arabia and a formidable military. But Egypt’s economy is weak, and it actually depends on the Saudis and its other rich Gulf Arab allies.

The greater problem, however, is that these states don’t offer a viable political-economic model for the Sunni Arab world. It is this poverty of thought that has allowed IS to sell its caliphate model to many Sunni Arabs in the region, a clear majority of whom are youths. Though its fighting force is on the defensive right now, IS will resurrect itself in some shape or form. All the while the Sunni Arab world – the Islamic State’s major base of fighters and support and the one force that could overwhelm the group’s ideology – will fail to move beyond antiquated religious-leaning monarchies and secular republican regimes.

The Glory of a Summer Sleep


Credit Kevin Lucbert

Summer is the silent season, when vacations offer virtually the only chance for legions of beleaguered workers to escape their responsibilities. A wanton slumber on a hot afternoon offers the luxurious expanse of wasted time. The world can keep turning without us for a while.
The word “holiday” owes its origin to religious observance, to a “holy day.” It brings with it the sense that encounters with the sacred reduce us to inactivity. The word “vacation” does something of the same job. It means emptiness or vacancy, an idea that many people find so frightening that their vacation schedules seem more exhausting than their actual work. But these people will miss out on the deeper engagement with oneself that a vacation can allow, away from the props of status and career.
Thinkers throughout history can be paired on the basis of their ideas around sleep, silence and vacation. The hero of “The Odyssey” returns to Ithaca after 20 restless years to find his bed. He won’t tell his story until he has paid off his debt to sleep. The hero of “The Aeneid,” on the other hand, having made a long speech, gets out of the bed he shares with Dido to go and found the Eternal City. As he sets sail from Carthage, Dido burns the bed.
Here, in a nutshell, is the difference between the mysticism of ancient Greek philosophy and the pragmatism of Roman. One moves into silence and rest; the other is driven out of bed to get things done.
Or consider the two great vacation stories of the 18th century: “Robinson Crusoe” and “Gulliver’s Travels.” Crusoe is an embodiment of the Protestant work ethic, a one-man civilization. For him, sleep is mainly about marking the time between days. Gulliver, on the other hand, lands in Lilliput and surrenders himself to the best sleep of his life. When he wakes, he is 12 times the size of everybody else. Crusoe’s sleep is part of the order of the world; Gulliver’s is a doorway to another world.         
There is a central cultural contrast here: Do you take sleep, or do you let sleep take you?
I have been a teacher since Plato founded the academy. With each passing year, I observe in a number of my teenage students higher levels of both anxiety and exhaustion, two burdens that are closely related. Both feed off the fiction that these young people have never done enough or been good enough. Silence and sleep are the two places in which students can put down these burdens. But these are skills that have to be learned. The senior counselor at our school says that poor sleep is his No. 1 predictor of poor mental health.
Every summer we take a group of incoming student leaders away for a few days. As part of the experience, we rise at 5 a.m. to visit a Cistercian monastery where a group of monks live in almost complete silence, pursuing a lifestyle that has not changed much since the 11th century.

Young people find this commitment utterly confronting. It is far more outrageous to them than any possible expression of sexuality.
A friend of mine, Brother Bernie, is the prior of the abbey we visit. He has lived there for 40 years and is one of the sanest people I know. I tell my students that Bernie is one of the few friends with whom I have never argued. That is because he so seldom speaks. He describes the monastery as a “fridge magnet,” something that reminds the rest of the world that it doesn’t have as much to say as it thinks it might. Bernie believes that God doesn’t use many words either. His life involves listening to deep silence. The students are gobsmacked. So am I.
Abraham, Moses, Elijah, Jesus and the Prophet Muhammad were all deep listeners. Whether you think they were listening to God depends on many things, not least whether you are prepared to take a leap of faith. But you can’t read their stories without noticing the ways in which they were all reduced to a creative silence in which their egos shrunk and their minds opened. It is no coincidence that many sacred texts reserve a special place for sleep. Mystical experience is supposed to bring into our conscious waking lives some of the most important things we do unconsciously while we are asleep.
Sleep is the most generative part of our day because it is when our ego gets out of the way. I am fascinated by sleep perhaps because I have so often struggled to achieve it — both as a sufferer of severe sleep apnea and, more happily, as the father of twins. I have learned that when you cannot sleep, the discipline of silence can serve as a substitute, a kind of waking sleep allowing us to let go and live in the present. This does not mean it is passive or vacant. It means we surrender control and begin to listen.
There are worse things to do than nothing.