Kremlin and Beijing tell western world to be more capitalist

Apparently, according to Justin Raimondo, Vladimir Putin has either swallowed Man, Economy, and State, by Murray Rothbard, or he has invented a Russian parallel version of Austrian economics. For example:

"In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated."

At Davos this week, Putin basically told western leaders to "Get Austrian or Disappear Down a Black Hole". I'll let you read Mr Raimondo's article to make up your own mind, though it would fail to surprise me if former high-level Communists really did know Austrian economics quite well. The books they were truly afraid of in the old Soviet Empire were kept locked up for the eyes of the nomenklatura only, in the same way that the Abbot of a medieval Abbey had access to works of devilish heresy and blasphemy. Even now, the original library of Mises is still kept in Moscow, after having been taking there from Berlin, by Stalin, in 1945. Hitler himself stole the books from Mises' old apartment in Vienna, when the Great Dictator returned to the Austrian capital, in 1938:

=> Putin to the West: Take Your Medicine And don't go Socialist

When the Kremlin starts telling the the Great and the Good of the west how to become proper capitalists, this is funny enough, but when the third biggest cheese in the Chinese communist party starts syncopating to the same rhythm, we really do have to acknowledge that we have entered a topsy-turvy world of Alice-in-Wonderland proportions.

Premier Wen Jiabao, (温家宝 - which in my appalling version of Chinese is the splendidly capitalist name of 'Mr "Family Treasure" Warm') has perhaps not quite swallowed the full bibliography of Uncle Murray Rothbard, but he certainly seems to have got the basic gist:

"Some economies have imbalances in their economic structure. For a long period of time, they have had trade deficit and fiscal deficit. They have been overspending by borrowing. Some financial institutions pursued profit in a blind way without effective regulation. They have been using excessive leverage to gain huge profits but once the bubble burst, the world was exposed to disasters."

However, what interested me most was what Premier Wen said later, in an off-hand quote:

"Confidence is the theme of my European journey. I believe confidence is the most important thing, more important than gold or currency."

Now why did he say that? What was on his mind? Gold? Why was he thinking about gold? Surely we all stopped thinking about that barbarous relic in 1933?

We often reveal more than we want to when we speak, however, and Wen will be used to having inconvenient statements airbrushed into memory holes, back home in Beijing. Western leaders are continually surrounded by microphones, so they usually know when to keep schtum. But is the same true of the Chinese Politburo?

Western financial analysts are desperate for Premier Wen to tell us how China is going to 'save' the western world. What they have mostly forgotten, if they ever knew it in the first place, is that Premier 'Man of the People' Wen is only interested in one group of people; the Chinese themselves (and good luck to him). Just as Gordon Brown is only interested in one group of people; British socialists, and how they can help him remain as Prime Minister.

At the moment the Chinese are between a rock and a hard place. They have $1.5 trillion dollars worth of western government bonds. Every western government, including that run by the odious Gordon Brown, wants Premier Wen to buy some more; a lot more. But Mr Wen faces a problem. If he buys more, he could be left with the world's most expensive fire-lighters when the pound and the dollar collapse in the forthcoming bond bubble burst, which will mean that Wen will never achieve the top job in the Politburo; to have climbed so high and to still be left gasping for the top two rungs will be a major disappointment in his life.

On the other hand, if Mr Wen starts selling what he has now, to fund his road-building program in China, he could start a financial avalanche, which will once again lead to the collapse of the dollar and the pound via another route. Once again, Premier Wen will end up with the world's most expensive fire-lighters.

So what is a man to do? He is going to have to be really careful and very cagey indeed, if he wants to get any value at all out of that huge pile of foreign reserve bonds, and then that top Politburo job which will surely be his prize.

If he really wants it, Mr Wen is going to have to make a play worthy of Deng Xiaoping himself (邓小平).

But surely he wouldn't be able to think of a cunning plan to replace the paper Renminbi with a Golden Yuan, would he? Or as I would prefer to call it, the "Jin"? (The square character 金 - jin - means "metal/gold/currency".) Well, you never know. If he does pull this rabbit out of the hat, to finally pull the peg on the dollar and to stop importing American inflation into China, then remember that you read it here first.

(I'll take similar credit if Mr Putin beats him to it by creating a Gold Rouble.)

If either the Kremlin or Beijing does introduce a gold currency in the next few years, then we really will be living in the Looking Glass.

What a funny old world.