Saturday, July 11, 2009

Analogy attack

Many inflationist economic commentators like coming up with various analogies to describe how inflationism is the only solution. There was a great one this morning in the Labourgraph:

Stimulating a sluggish economy with easy money is like trying to move a large weight with a piece of elastic. For a long time, nothing happens, so the authorities pull harder and harder. Then, all of a sudden, the weight shifts, and with startling speed hurtles towards them and smacks them in the face.
Apparently, it's all a question of knowing when to release some elastic and getting the force just right.

This may be OK for teenage boys in the bedrooms of teenage girls, but to describe something as complex as a market in such a way is perhaps symptomatic of the simplistic way in which inflationists see the world.

What we need now is the harsh medicine of Uncle Gary's plan to put the world straight. Not that we'll get it of course, unless someone in the Middle East or Asia has the nerve to try it, in the face of US military aggression to stop them.

If the Bank of England apparently has the nerve to install high interest rates next year, why doesn't it have the nerve to put them in now? We all know what's actually going to happen. Next year, when price inflation really starts to pick up, the obvious need to increase interest rates to damp down this process (already way too late), will be pathetically tried with a half per cent interest rate hike, from 0.5% to 1.0%. The screams of agony which this will create from our debtor nation will be so loud, that no further such attempts will be tried for some time.

Once price inflation therefore becomes massive price inflation, they will try again, doubling rates from 1.0% to 2.0%. Once again, the screams of pain will be too much to go further.

Britain is filled with a majority of debtors. Most people owe vast sums on the mortgages on their houses. There is no way these people will put up with interest rates of 15% or 20%, to kill inflation. They will do the obvious thing instead. They will vote in, using their majority power, a government that will remove their debts by allowing massive inflation to take place.

Obviously, the economy will be destroyed in the fashion of a 1980s Brazil or a 1990s Argentina, but if the majority of voters are debtors, expect politicians to promote debtor-friendly policies.

Now you weren't thinking those 'green shoots' were actually real green shoots, were you? You really ought to listen to your Uncle Jack.

(But fix your mortgage, if you can, just in case.)

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