Posted by Jack Maturin on November 7, 2008 8:51 AMA discerning gentleman writes:
So, it looks like we are heading down the same stagflationary waste disposal unit that the Japanese have been living in for the last two decades. To praise the UK government and its organs for this lowering of interest rates thus reveals the blinkered economic view of the Keynesian-dominated Telegraph editorial team.
To suppose that a problem caused by artificially low interest rates is going to be solved by artificially low interest rates, is to be living in the same world as a heroin addict who thinks that their destructive dependence on drugs will be solved by a regular prescription of diamorphine.
My apologies for what may seem like madness, in the light of "orthodox" Keynesian economic analysis, but what we need to be doing right now is to raise interest rates, to get this pain over with as quickly as possible. We need to rapidly liquidate the malinvestments of the last decade and to quickly remove the incompetent managements of badly run companies that took the wrong decisions in this malinvestment decade, before their poor decisions continue.
What this palliative measure will do is to keep asset prices up, thus preventing their quick liquidation, and keep bad managements in position because they will be able to borrow more cheaply to cover up their decision failures. They will thus keep investing in the wrong things, thus preventing other better people from making a better use of the scarce economic resources under their control. We are, it appears, deliberately turning a sharp corrective recession into a prolonged stagnating depression.
Free market capitalism, as opposed to the state capitalist model we live under, with its central planning board commissars and civil servants at the Bank of England, is based upon real saving and investment, that is putting off what you could consume today to get a better consumptive return in the future through productive investment.
This "easy credit" policy from the (Ha!) "independent" Bank of England, fed by money out of thin air, and remarkably in line with exactly what Gordon wanted, will punish savers and investors and reward consumers, which is exactly the wrong thing to do in a recession caused by too much consumption fed by easy credit.
Pretending that this new Bank of England paper money actually represents real savings is to be living in a dream world.
So what's going to happen next as we are deluged with this printing press confetti?
Get ready for zero per cent interest rates, because they are coming, and the subsequent destruction of all of your savings, investments, and pensions.
Get ready for ten years of destructive stagnation, just like they have had in Japan. And this was a country with the best savings rates in the world. We, in Britain, have one of the worst savings rates in the world, encouraged by a profligate all-consuming government to spend every penny as it came in the door; we may therefore be looking at an even worse prognosis.
Better go out and buy a Korean 100-inch high definition television while you still can, then, and while the pound in your pocket is still able to buy anything from abroad.
You'd better have something to watch while these pounds turn into worthless dust, due to this ongoing printing press madness.
Thanks, Bank of England. And don't think we will forget who caused this mess, when we look back in ten years' time.
Though of course central government employees, such as those at the Bank of England, will be fine. What little wealth there will still be left in the country will be taxed away to feed their index-linked government pensions. So why do they need to worry about anything as simple as the appalling consequences of their stupid actions?
Posted by David on November 7, 2008 9:32 AMTo which there was only one adequate response:
Thank you Jack Maturin for a fabulous web site. I have downloaded Americas Great Depression and will read it NOW
Posted by Jack Maturin on November 7, 2008 10:15 AMThe Rothbardian propaganda is spreading! ;-)
Posted by David on November 7, 2008 9:32 AM
Thanks, David! :-)
If anyone else wants to learn the viws of the Austrian economists on what is really going on here, as opposed to the Keynesian orthodox view that we are currently being subjected to by the government and its various government-licensed organs, the very best book you can get hold of is "America's Great Depression" by Murray Rothbard.
First written in 1963, but going into five separate editions, not only does it rationally explain everything about the 1930s calamity of its title, it is also unerring in its predictions about how our current crisis would come about, what the world's governments would do in response, and why all of these actions would be exactly the wrong thing to do and what the unintended consequences of these bungling hand-to-mouth actions would be.
You can download a freely available PDF of this book via its publishers, the Mises Institute, from this PDF download address:
This is the plain speaking book the Keynesians do not want you to read. They can't refute it. And they fear that if too many people know of its contents, they are going to be out on their collectively aggregated ears.
Later, another man of quality writes:
Posted by brian kelly on November 7, 2008 12:38 PMI won't reply on the Torygraph web site, because I don't want to hog it unless I have something vaguely useful to add, but if you reach this web site, brian, nice one! ;-)
[Posted by Jack Maturin on November 7, 2008 8:51 AM] - This seems to me an excellent post. The situation is complex - and not only for laymen such as me. But my instincts and opinions are entirely in conformity with this poster.