I do not often look at, and never buy, the Financial Times newspaper. Partly, and perhaps unfairly, because of the Marxists it used to employ and partly because the main relatively free market voice in the newspaper is that of Samuel Britton – a man who supported the exchange rate fixing ERM of the European Union. A very bitter political dispute in Britain some years ago, about which people on opposite sides still carry a lot hatred to this day – well if they are unforgiving people like me they do.
However, I happened to see a copy of the Financial Times a few days ago and had a brief look at it.
There was an article by Lawrence Summers suggesting three steps to avoid an American recession. The three steps were basically “more subsides, more subsidies and more subsides”. People who owned money on their houses were to be helped by the government (via various “private” entities it controls), the banks who are suffering a “credit crunch” were to be helped as well, and the whole system was to get more money also.
Why not just print the money and throw it into the streets at random? Or if computers must be used, just tell everyone they have ten per cent more money in their bank accounts?
Perhaps because following a Major Douglas style approach is too open and public. The political merit of complex and private subsidies, as supported by Lord Keynes, is that it both gets powerful private special interests on the side of the credit-money expansion and keeps things from the attention of the general public. Of course one must not ask too many questions about what caused the credit money bubble in the first place – just a bit of vague talk about “animal spirits” or “speculation” will do. As Mr Summers says “the time to worry about bad debts is over” – we must “keep the credit flowing”.
So the way to deal with a credit-money bubble is to increase the amount of credit-money. Well the Federal Reserve, and the rest of the system, have been playing this game a long time – the last serious effort to let the system clear itself out was in the early 1980’s when Paul Volker was head of the Fed. And with the basic situation, the entitlement programs and so on, so vulnerable now I do not see much chance of people of power accepting a clear out – till it is forced on them by events.
As for the Financial Times, articles like the one by Mr Summers reminded me why it is a good idea not to buy it.
I did look at the article directly below Mr Summers’ article. It was about how the Democrats should not give any “hint” that they are hoping for defeat in Iraq – which is odd as many of the Democrats have been doing everything short of conducting a Black Mass to Satan in the hope of that there would be defeat in Iraq. The article also said that the Democrats have a “winner” in their idea of the United States government organizing health care for 300 million people.