Thursday, June 05, 2008
Argentaria Britanniae delenda est
It never ceases to amaze me how the entire government and media establishment keeps telling us repeatedly that the worst is over, with the current financial crisis. When HBOS tell us today that the average house price has fallen 3.8% in the last year, we will almost certainly be told tomorrow that conditions are easing, and that we can expect things to improve in the next few months.
We will then then be promised that more government intervention will help us achieve this happy outcome. Why? It is government intervention which has got us into this mess in the first place, with its heady cocktail of tax, regulation, and Bank of England stoked inflation, all three of which have caused massive malinvestment in all parts of the economy, but particularly in the housing market.
We have a long way to go down yet, though I lack exact knowledge about where the bottom lies. However I do know it lies a long way south of 3.8%. How about 10%, 25%, or even 40%? In a couple of years 50% would fail to surprise me, but whatever the case, this bubble has some way to pop before it's all over. The only government intervention which could stop such a price collapse is a massive expansion in inflation, with prices rising at 20% plus a year, but even Sir Mervyn King and His Majesty Gordon Brown might balk at that. Though don't rule it out. Brown will do whatever it takes to save his own personal 'legacy' and all the debtors of Britain, which is most of us, may begin screaming for interest rates cuts and more inflation, before very long.
So what's the solution? First and foremost, the Bank of England should be barred from creating any more money out of fresh air. They should not be allowed to buy anything and all of their running costs should come out of charges on commercial banks rather than out of the printing press, as at present. We should take the forthcoming recessionary hit, and then thank our lucky stars it wasn't worse, when it is over in about two years time. Every single government intervention will extend this period in an equal ratio to its individual stupidity.
Once we have the BoE in check, we should then begin a massive program of tax cuts and regulation bonfires. Admittedly, as a Rothbardian, I want all taxes cut and all regulations burned, but I'll settle initially for the removal of all business taxes (capital gains, corporation tax, etc), and the burning of all business regulations, especially anything coming out of the EU. However, the most important act will be to shackle and then destroy our central bank and return our currency to a commodity basis, this time bringing deposits into the loop as well as cash, and then removing fractional reserve fraud where a banker can take in one gold coin and then mysteriously lend out 20 gold coins, as at present.
Once we have removed the BoE, the tax and regulation cuts will then take care of themselves, because without being able to recycle government bonds via its useful idiots at the BoE, the Treasury will have to pay for all government expenditures out of tax or savings. This combination will provide us with a double-whammy regulation-cutting effect.
To increase savings income, the government will need to reduce bureaucratic oversight, by sacking non-jobbers directly and the regulations which drive their current employment. To increase tax income, the government will also need to remove wealth restricting regulations, thereby sacking non-jobbers indirectly, to allow the market to generate more income. Although I would never go so far as to say the removal of the Bank of England would give us an honest government, it would certainly provide us with a far less dishonest one. The magic of recycling bonds allows the government to continually increase its income without increasing taxes or decreasing spending. Why do you think we have the Bank of England in the first place?
Carthago delenda est was a stock phrase of Cato the Elder in the Punic wars. "Carthage must be destroyed." My feelings are similar about the Bank of England. Argentaria Britanniae delenda est. The Bank of England must be destroyed.
UPDATE: More statist nonsense from the Torygraph, asking whether the government should intervene to solve this crisis. Obviously, I couldn't let that one pass without a comment: Jack Maturin on June 5, 2008 11:01 AM.