The ‘Paul Marks Plan’ to save the world economy is inspired by President Bush and Tim Congdon. I can save the world economy on my own, all I need is the cooperation of the public authorities!
First interest rates must be reduced to a negative level (quite a moderate level, say -0.5% although I would settle for -0.1%) then I will borrow huge sums of money and use some of it to “buy cars” as President Bush has suggested. I will also “buy up every decent security in sight” every time the banks get into trouble – as Tim Congdon has pointed out must be done. But it is the “buy cars” suggestion that has really inspired me, and for a special reason. You see I can not drive – and so I would smash up the cars I bought in car crashes, thus meaning not only would I buy more cars, but the drivers of the cars I smashed into would buy more as well.
It would be a wonderful example of stimulating the economy via consumption. A point that the school of thought led by the late Lord Keynes and the school of thought led by the “monetarist” Tim Congdon are in full agreement upon. And whilst such Chicago School people as the late Milton Friedman might not be wildly happy with the direction of ever greater subsidies for the banks that Tim Congdon has taken “monetarism”, the great Tim would be quick to point out that Milton Friedman would not be able to present clear economic principles showing any error in his conception of money and banking – so it must be okay then.
In case anyone think the above is, er, insane… I would point out that it is more moderate than what the British government has already announced, such as one third of the entire British economy (not the government budget – the entire economy) being pledged to back up the banks.
This goes beyond even what President Bush and Congress have done in the United States. Surely we are moving towards the glorious day, worked for so hard by Tim Congdon, when the entire economy (not just the government budget, but everything) is devoted to subsidising the financial services industry. Let us reject such reactionary nonsense as the principle that every Pound of lending must be from a Pound of real savings. And let us also reject the reactionary principle that if a business goes bust it goes bust – and that a bank is no more entitled to protection from “bankruptcy” than a coal mine is. And, most important of all, let us reject the rigid dogma that once money is lent out the lender does not have it any more – till when, and if, it is paid back.
With ‘advanced banking methods’, backed by government of course, one hundred Pounds of physical savings can be multiplied to vastly more than that in loans. One plus one need not equal two – it can equal any number clever people want it to. And with credit money expansion by the public authorities any problem can be overcome. Credit money expansion, under the control of wise and well paid ‘experts’ of course, can achieve anything and no petty thing like either logic or physical reality can stand in its way.
We can achieve a perpetual motion machine – accept that it will speed up.
Of course scientists might claim both that such a thing was ‘impossible’, and that even if it was not that it would destroy the universe. But so what? If we destroy the universe we can create other universes – by an act of will. After all the physical distance between Chicago and Cambridge already seems to have collapsed.
As President Bush and Tim Congdon have explained – prosperity will return, as long as we pump out enough credit money!
My understanding (such as it is) is that European banking started way back was that “banks” were benches out in the square where monies were exchanged and loans and deposits arranged. Now if the banker was found to be unable to cover his debts the city authorities would send big lads round and publically smash your bench in twain – hence “bankrupt”.
Also Paul, why not just suggest adopting the 7 cent nickel.
Actually Paul your scheme is better than you thought. If we put you in a series of new cars (the faster and therefore more expensive the better) without being able to drive not only would you smash into other cars but buildings and people also. Thus you would stimulate the healthcare and construction industries as well 🙂
One question I like to ask people who believe that the best way to stimulate the economy is to
print moneyincrease liquidity is: “then should not counterfeiting be not only legal, but highly admired?” Forcing people to try to explain to themselves why one person printing money is an economic good, and another an economic evil, is quite an effective argument.We can also note that, in fact, private counterfeiting has several advantages over
bank counterfeitingincreasing liquidity. Privately counterfeited notes go straight into the economy and at a “grass roots” level. They do not need to be borrowed and thus do not incur interest. The local newsagent who is paid with a counterfeit note has instantly improved his sales; the homeowner who pays her mortgage with a counterfeit note instantly gains home security and increases the reserves of the mortgaging bank. Unlike dropping the money from helicopters, there is no risk of mob violence.In all seriousness, I’m personally not really convinced by the commodity money/gold standard argument. The only problem with fiat is the risk of governments printing too much of it. But we could imagine a restrained fiat system; the government prints money rather than banks having the printing/lending monopoly. The allowed expansion year on year could be tied to a strict formula rather than arbitrary judgements by ministers and central bankers. Each currency unit put into circulation would be treated as a commodity unit, rather than merely a “balance” (i.e. bank note serial number 01234 could only appear in one place at any one time; as a thought experiment we may imagine a database recording the location of each note- whether it is in an account or out there as a note “in the wild”, in which case fractional reserve as we know it becomes impossible as a demonstrable act of fraud- they currently get away with it by recording merely “balances”). And rather than every currency unit being loaned out, the new currency units could be simply put into circulation by paying them to government employees or the government spending them on goods- not a problem since the extra notes going into circulation each year would be a rather small number.
Monetarism at least one excellent is why I can never revere Friedman as some do.
We would all be better off if that man had gone into rutabaga ranching.
Wow. Freidman would have found nothing to admire in my scribbling before the first cup of coffee.
“Monetarism is at least one excellent reason why I can never revere Friedman as some do.”
There. (yeesh)
Ian:
This is not really about stimulating the economy, it is about control, pure and simple. That is why allowing counterfeiting is relinquishing control, and why your plan, however sensible, will never be accepted. But you already knew all that:-)
Yes I did, but thanks for saying it anyway Alisa 🙂
Lovely idea Paul 😉
But where would I park them?
There’s no bloody room in our road for the one we’ve got!
Billy Beck I am no Milton Friedman follower (I am Vienna man – not a Chicago man), but I do not believe that he would have gone along with the Tim Congdon bottemless-pit-of-subsidies-for-banking line.
“What is your evidence Paul” – I do not have any evidence, just gut feeling. However, I have learned to trust my gut instincts – however silly that sounds.
My guess is that whilst Milton Friedman would not have shoved his dinner plate into Tim Congdon’s face (as Ayn Rand did to her supposed follower Alan Greenspan), he would not have agreed with him.
The trouble is that, from his Chicago view of economics, Milton Friedman would not have a way of explaining to Tim Congdon WHY he is wrong.
Ian B.
There are theorectical arguments against fiat money – even fiat money of a fixed amount. But the real argument (to political me) is a political arguement – give governments this sort of power (the power to dish out bits of paper and make everyone pay taxes in them and accept them as payment for all sorts of stuff) then that power is going to be abused.
However, late in his life Milton Friedman moved from the classical monetarist increase-the-money-supply-in-line-with-economic-growth-to-keep-the-“price level”-stable” line to one holding that the Monetary Base (the notes and coins etc that the government produces) should be fixed – not increased.
Although, as far as I know, Milton Friedman never said that bank credit expansion (so that the various measures of bank credit, such as M3, were out of line with the Monetary Base) was a form of fraud (whatever the laws of the government say) and was bound to lead to boom-bust.
That was the line of thought from David Hume and others right to Ludwig Von Mises and beyond.
And (to my astonishment) even Nigel “shadow the D.mark” Lawson now appears coverted to the anti credit bubble finance case.
I happened to see an article today in the “Independent” newspaper (of all places) where Lord Lawson appears to be saying just this.
The article is not perfectly clear – but I can not think of any other interpretation of it that makes sense.
Don’t give up all hope.
Over the longer haul, the financial institution investments and holdings now being acquired by many governments (particularly the U S) can be transferred to and consolidated into a corporate format and sold off piece-meal to the public – some years down the road.
RRS
Would this be after Comrade Barack Obama and his friends finish destroying what is left of the American economy?
It may be that the collectivists (whether Marxists such as Senator Obama or nonMarxists such as Prime Minister Brown) fail in their desire for a world economic government – controlling banking and finance (and with a big influence over other things), although I would not bet that they will fail.
However, even if they do fail anyone who keeps their wealth or means of making a living in the United States under the control of people like “President Obama”, Speaker Pelosi and Majority Whip Durbin is out of their minds.
It makes me laugh (in a “bitter and cynical” way no doubt) when people warn it will be like the New Deal of F.D.R.
It will be vastly worse than that.
Think of a President Harry Hopkins or Dexter-White.
Paul, there’s an article which seems to fit your description by Dominic Lawson here. It gives Austrianism and the gold standard a positive write-up.
It also mentions that George (and Zippy and Bungle presumably) has declared “laissez faire is dead”, apparently. How anybody can still be hoping for something better than Brown from that shower of state corporatist shite called The Conservative Party is entirely beyond me.
I’ve read the arguments regarding fiat and gold standard and understand them (I think). I was merely saying that a theoretical restrained fiat would work. The problem is getting the restraint in place; but that is the same problem as with government in general. Unrestrained democracy is just as much a hazard as unrestrained money printing. I’m not at all convinced that keeping the price level stable by manipulating the money supply makes any sense whatsoever; I have yet to understand how one can measure a thing called “the price level”. All I can say is that bread ought to be cheaper than it was a century ago (being now made more efficiently) so if anything the general “price level” ought to fall with time.
Broken windows fallacy.
Paul, to be taken seriously, you will need to remove all the exclamation points in your plan. Only then will G.B. appoint you to the Treasury.
That’s the only point for improvement I could think of.
No shit Sherlock 😛 That was clearly the point Paul is making.
When I think of B.O. for President, I think the competence (his crisis-of-confidence speech, gasoline rationing), sophistication (thinking he could sweet-talk the USSR into being nice), and patriotism (asking our most deadly enemies in the USSR to help him get reelected) of Jimmy Carter but without any executive experience whatsoever.
Or I think of Berzelius Windrip.
Now as to the original subject, we should make people walk to work. This would be of great benefit to the manufacturers of shoes, to cobblers who could heal America’s soles, and to the makers of hybrid vehicles (more stop-and-go traffic), Also, people would be in a much better mood, from all of the endorphins, and would have much more time to say hello and to discuss the weather.
Alicia, I was going to suggest that instead of buying cars and smashing them up, he could just as well be buying houses, and smashing up their windows. This would be much less dangerous, and more in tune with the housing bubble, but I did not want to overstate the obvious:-)
Yes Broken Window Fallacy indeed.
I’ve just finished reading Henry Hazlitt’s “economics in one lesson”, chapter 2:
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http://freedomkeys.com/window.htm
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sun. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.