On the front cover of the current edition of the Economist people are given a “Bubble Warning“. If one reads the article to which the front cover refers, one is informed that the massive monetary expansion (i.e. creating money from nothing) and fiscal deficits of various governments, but particularly the United States and the United Kingdom, have artificially maintained false values in assets – in everything from shares to housing and commercial property. A vast bubble economy – an unsustainable mess that these governments have no real plan to deal with.
I admit that I read Economist articles (when I read them at all) through a deep red haze of rage – but I think I would have spotted the words “we are very sorry we gave governments such bad advice all through the current crises” and I do not remember them being there. For, of course, it was the Economist itself (along with the rest of the establishment) that pushed the policies of bailout (TARP and so on) and “stimulus” that have meant that markets have not cleared, mal-investments have not really been liquidated and the bubble economy now stares us in the face.
The economic crises of 2008 was caused by the general increase in the money supply pushed (each time they “saved the world” i.e. prevented a clear out of mal-investments, year after year) by Central Banks – particularly (but certainly not exclusively) by Alan Greenspan of the Federal Reserve. The role of the Fed in general is explained in Thomas Woods’ work “Meltdown”, and the political reasons why the increase in the money supply flowed especially into the housing market are explained in Thomas Sowell’s work “Housing: Boom and Bust”.
In 2008 is was no longer possible to avoid a terrible economic slump. That chance was lost when Greenspan (and his fellow government Central Bankers) had “saved the world” by avoiding (by increasing the money supply) the painful but needed clearing of the market and liquidation of mal-investments – which they did again and again over the years, with each time they did leaving the bubble economy worse than it was before – putting off the problem (and making it worse) not solving it. However, it was still possible in 2008 to have started out again clean – to have a short, although terrible, slump and then rebuilt the economy (such was the experience when, for example, the American government choose not to “help” in the slump of 1921 – the depression everyone forgets because, in the United States, markets were allowed to clear and real recovery allowed to happen). But with “TARP” and “quantitative easing” and all the rest of the tricks and (wildly expensive) nonsense put in place from 2008 by B.B. (if only that stood for “Bilbo Baggins”) and the governments of President Bush, President Obama and Prime Minister Gordon Brown, even that option may now be closed to us.
For the Economist to now (when it is too late) to issue a warning about government monetary and fiscal policies propping up unsustainable asset prices and prolonging (rather than ending) the bubble economy, is the hight of hypocrisy. It is like a tripping a man so that he falls off a cliff and then (as he falls) calling out “watch out”, or (as a friend just suggested to me) it is like tying weights to a man who is a lake – and then, as the man drowns, saying…
“My dear Sir – I must warn you of the danger of going swimming with lead weights chained to your legs”.
Of course some people are saying “but Paul, the Economist has repented – have you no Christian charity?”
They have not repented – they are, to use crude but honest language, just covering their own backsides. They know the present situation is “unsustainable” and they know that this information has got out to many people in the general population (for example the millions of people involved in the Tea Party movement in the United States) so the Economist writers wish to be able to pretend that they were not trying to decieve anyone by supporting bank bailouts and the like (some of the top people in the financial services industry being known as “Daddy who sent me to Oxford” to many of the Economist writers), on the contrary – they are warning us all (now it is too late to prevent the things that are to come).
How can I prove that the Economist has not repented?
Quite simply. In the very same issue of the magazine (or “newspaper” as it calls itself as a financial dodge) there is an article on Iceland. In this article the President of the country is sneered at for giving in to demands by the people of Iceland for a vote on the payments suggested by the government of Iceland to the British and Dutch governments. A payment (over a number of years) of some three billion Pounds – or ten thousand Pounds for every man, women and child in Iceland.
Under the laws of Iceland there was no pledge for the taxpayers to bailout big deposits (only quite small deposits in banks registered in Iceland… still less to pay overseas governments), this is a suggested new law, which the government of Iceland is trying to pass after the fact.
So why does the Economist sneer at the President of Iceland for allowing (or saying he is going to allow) a vote by the people – a vote demanded by at least 70% of the population of the country.
The Economist opposes allowing a vote because this will undermine the government of Iceland getting overseas government aid (yes the government of Iceland should bankrupt itself – so that it will get aid). And, even more important, allowing the people a vote on the payments to the British and Dutch governments, might (if the people dared vote “no”) undermine Iceland chances of being allowed into the loving embrace of the European Union.
In short allowing the people a vote might mean that (horror of horrors) Iceland kept its independence and did not submit to having less autonomy than it did under the Danish Crown before Second World War, or even the First World War. Total submission to the international political (and credit bubble financial) elite is the highest good to the Economist and if people (in any nation) wish to maintain some say about their own lives, they must be crushed.
Anyone still want to maintain that the Economist has repented?