Saturday, January 10, 2009

What ever happened to 'Bank of England' Independence?

With President Obama guaranteeing America's financial destruction with his promise of annual $1 trillion dollar deficits and Alistair Darling contemplating running the Bank of England's "independent" printing presses night and day, one wonders why nobody ever thought of this before.

If you're having a problem because of too much debt, then simply increase your debt and print tons and tons of extra money to provide a wealth stimulus. Paul Krugman has been telling us this for years.

You would have thought some of the people in Africa might have thought of this first, especially those ruling over really poor countries such as Zimbabwe?

Oh, and by the way, whatever happened to 'Bank of England' independence? I was watching an interview with Gordon Brown on a train the other day, while he was 'going somewhere dynamically' and talking about the forthcoming interest rate cut. The next day the Bank of England announced an interest rate cut. How did he know? And while we're on the subject, is there a train somewhere which just runs backwards and forwards on a side-track to give Brown somewhere 'dynamic' to sit while he's being interviewed about how independent the Bank of England is? I suppose he hates being seen sitting in the back of his Jaguar limousine, these days, or in a First Class seat on British Airways.

At least he knows more than those idiots Cameron and Osborne. Yes, a promised £4 billion tax cut for basic tax-rate payers is a minimally tiny step in the right direction, but does cutting government spending by half of one per cent really constitute anything other than a posture? If they were talking about a £100 billion or £200 billion, backed by real spending cuts, then it might amount to a hill of beans, but £4 billion is just noise. Pathetic.

Well, sorry if you've already read lots about this in the Daily Mail. I've been off-piste for a few weeks, and not been keeping up with the papers. I will also be wandering below broadcast depth sporadically for the next few months, too, as I struggle to keep my business alive.

But fear ye not, the Austrian fight goes on, whenever I'm not too busy trying to keep my business afloat.

Oh, and while I do this, isn't it nice to know all those well-paid £100 grand-a-year types in the public sector are actually pleased about the ongoing crash. They're getting lots of cheap prices and there's no chance of them losing their jobs or suffering a pay cut, plus all of those evil people in the private sector (whom they are supposed to serve and who are forced ultimately at gunpoint to pay their wages) are getting their comeuppance for their anti-socialist immorality.

Oh well. They'll get theirs in about 18 months when the bond bubble explodes and Gordon Brown finally runs out of cash. Hopefully I'll be in Singapore or Dubai by then, if I can swing it. I just saw another great Chinese word today, as I progress through my Pinyin character set, 一千万(yi qianwan), which means "ten million" or literally, "one thousand ten-thousands". One wonders how many "一千万" lumps of money Obama is going to be asking the Chinese government for to bail out his own Xanadu, over the next four years. (I'm back up to recognising 150 individual characters now - no words yet, alas, just characters - and I hope to get this up to 500 by the end of February - it's both an incredibly difficult and incredibly interesting script to learn, but once I have 500 characters under my belt I should be able to start learning enough words to string a sentence together - anything to avoid starting the tonal speech lessons!)

From an Austrian point of view, I'm particularly interested in words like 钱 (qian) which means "money". The radical on the left-hand side is the symbol for metal. Also, there are words like 贵(gui) for "expensive", which is a character in the traditional format based upon a shell radical, because before the Chinese used silver for money, in ancient times they also used shells. Thus validating Mises' theory that money must always originate from commodities rather than from government fiat.

And this should be the route out of our current mess. Here's my own impossible dream about how that will happen. (1) Ron Paul somehow becomes American president. (2) He appoints Peter Schiff to take over the US Treasury. (3) Paul also asks Jim Rogers to rescue the 'Mother Country' and rule over here. (4) All three men institute a gold or silver commodity money standard with a 100% reserve. Obviously, I usually then wake up from my splendid dream. However, until we get to commodity money this crisis is going to continue until it just becomes normal living or another Margaret Thatcher turns up, with Hayekian or Misesian radicalism at their heart, to shake things up.

Yes, government workers in Britain (and alas I do know quite a few, I'm afraid) hope that "something will turn up" before another Thatcher, hopefully before the government stops screwing me to pay their wages, but I'm afraid they are whistling in the wind this time. Keynesians never worried about the long run, back in the twentieth century - now we're living in their long run and no amount of bailouts or fiscal stimuli are going to get us out of this one.

I suppose a lot of people are hoping that China will somehow provide the world with a miracle. Alas, once again they are forgetting that the Chinese need to look after someone else first, before they look after us. Yes, themselves! Hence my pitiful attempts to learn their wonderful language. Plus, they 'only' have about $1.5 trillion US dollars in their reserves, which is only enough for 18 months of Obama government.

Though I do think the Chinese in particular, and Asia in general, including Japan, and probably including commodity-rich countries such as Australia and Canada, should come out of this well, especially if someone takes the plunge and introduces a commodity money.

Alas, the only thing I can probably help the Singaporean Chinese with are financial products, and they've just shelved thousands of financial products people in Singapore! Monkeys. Oh well, where there's a will, there's a way.

Pip pip!!

7 comments:

Anonymous said...

When five out of the nine members of the MPC are appointed by the government the Bank of England has never been independent. It was always just a ruse to allow the government to disclaim any unpopular moves the bank might make.

Jack Maturin said...

Well, I think people are beginning to finally see through this ruse now. As Gordon Brown smiles more and more, we know he must be getting more and more desperate.

His first banking bailout flopped and his proposed 'second' bailout will also flop.

Yes, it might help a few chancers like me, in the City, fund an escape route to productive climes, but it will do nothing for any other taxpayers.

I think this is really it. This really is the Keynesian long run. There is nothing that they can do to sweep it under the carpet. They’re trying like billy-o, but they just can’t do it – they should’ve listened to their Uncle Jack!

If I was a Mises-Institute supporting billionaire, I would be laughing right now. Alas, with the state of my business I'm a long way from laughing, but neither are the mandarins in Whitehall. I think (or at least hope) that this time they may well be well and truly buggered.

If they keep going with this monetary inflation they could wipe out the pound and force themselves into the hole of a full commodity money standard. Nothing they are doing is working. From an Austrian viewpoint it’s hilarious watching them make one cataclysmic decision after another, unable to generate another boom to get themselves out of the current bust.

Where will we end up? I think begging the Chinese and the rest of Asia to save us. As the Chinese say, we certainly live in interesting times.

Rob Harris said...

If you're memorizing the English meaning of Chinese characters, you might find this book helpful - link

not an economist said...

Why do you say that Japan will come out of this downturn well? As I understood it they have been trying to borrow and tax their way out of recession for nigh on 15 years now but to no avail. So how has that prepared them to survive more than GB or USA?

Jack Maturin said...

The real engine of Asia is China, especially now that the Singapore-Taiwan-Hong-Kong virus has so thoroughly infected it.

Suppliers of services, commodities, and goods to China will be in the second wave of beneficiaries.

Japan is right there, next door, to help service China, and I believe they will take advantage of this.

Fortunately for the Japanese, is that although they allowed their stupid government try to kill them with Keynesianism, because of their tremendous work ethic and high savings rate, plus their relative lack of external debt, they're not quite killed off just yet.

We and America, on the other hand, are buggered. We have massive levels of external debt, an abysmal savings rate, and a country filled with millions of work-shy benefits bums.

Japan nearly got buggered. We will be buggered, and the Chinese will be laughing. Just give it five years.

Jack Maturin said...

Thanks for the book link, Rob. I'm currently using the following set of flashcards, which is going great guns:

http://www.amazon.co.uk/Chinese-Flash-v-Tuttle-Cards/dp/0804833613/

But I'll get the Hanzi book if I get stuck, or if it gets a bit cheaper, whichever comes first! $-)

I've even just amazed myself by knowing straightaway what 写 means!

这个汉字写的很好!

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