‘An economics correspondent’ writes..


This post is by from The price of everything


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Keynesian economics: “the
pseudo-scientific economics of averages.”

 

      
Friedrich Hayek, ‘A Tiger By The Tail: the
Keynesian legacy of inflation’.


 

In 1816, the net public debt
of the UK reached 240 percent of gross domestic product. This was the fiscal
legacy of 125 years of waging war against the French – rightly, in my view. I
mean, all that garlic – come on. So anyway, what happened next after Britain
was landed with this crushing burden of debt ? The Industrial Revolution. Yes,
in 1764 in the village of Stanhill in Lancashire, local public relations
consultant Lansdown Hargreaves was so repelled by the enormity of state debt fifty
years before it had happened that he fell over his young wife, Jenny – and the
Spinning Jenny was born. The Spinning Jenny was a means of pumping water from
deep mines. I know all about the mining industry and indeed all other
industries having devoted my entire professional life to the study of economics
and nothing else. I do wish people without expertise or experience would stop
pontificating about things they don’t understand using theories that have been
fundamentally discredited.

What I find particularly galling is when economics correspondents extravagantly
flaunt their lack of historical analysis or even basic logic and seize,
speciously, on one extreme and specific data point and then use it to develop a
baseless theory that has no practical validity whatsoever in the broader
economy or in relation to any other period and indeed constitutes a gross
distortion of reality, causality, the space / time continuum, gravity, and
basic common sense. I also dislike it when narrow pillars of the establishment
dismiss out of hand and with minimal detail anything which disagrees or fails
to conform with their (very conventional) world view. As I was saying, 19th
Century entrepreneurs – and I am one too (a 19th Century
entrepreneur, that is) – were so disgusted by the build-up of government debt
that they immediately started the Industrial Revolution as a means of
signalling their contempt.  Cornish
engineer Gromit Wallace then managed to quadruple the national debt which of
course led directly to a surge in GDP and the creation of the Internet.

People are (wrongly, in my view) worried about inflation, and the
explicit inflationary stimulus of quantitative easing, which I support. The
economist John Milton Keynes once wrote as follows:

“By
a continuing process of inflation, governments can confiscate, secretly and
unobserved, an important part of the wealth of their citizens. By this method
they not only confiscate, but they confiscate arbitrarily; and, while the
process impoverishes many, it actually enriches some. The sight of this
arbitrary rearrangement of riches strikes not only at security, but at
confidence in the equity of the existing distribution of wealth. Those to whom
the system brings windfalls, beyond their deserts and even beyond their
expectations or desires, become ‘profiteers,’ who are the object of the hatred
of the bourgeoisie, whom the inflationism has impoverished, not less than of
the proletariat. As the inflation proceeds and the real value of the currency
fluctuates wildly from month to month, all permanent relations between debtors
and creditors, which form the ultimate foundation of capitalism, become so
utterly disordered as to be almost meaningless; and the process of
wealth-getting degenerates into a gamble and a lottery.”

“There
is no subtler, no surer means of overturning the existing basis of society than
to debauch the currency. The process engages all the hidden forces of economic
law on the side of destruction, and does it in a manner which not one man in a
million is able to diagnose.”

Makes you think, doesn’t it ? Well it doesn’t make me think, of course,
but there you go.

Austrian school economists are all child-molesters. It’s a fact. Look it
up. Ludwig von Mises and Hitler were actually the same person. I hate
Americans, especially Austrian school economist Americans. Ron Paul selfishly
started the Great Depression but happily the Second World War ended it. The
bottom line is that it’s best to enjoy tremendous influence within the
corridors of the Keynesian establishment, and you don’t. And whereas I am being
direct and cogent, you are merely being simplistic.

People often ask me who should be in control of our money. I say to
them: the state should be in control. Salus rei publicae suprema lex. That basically translates as: I get paid by the establishment. I therefore support Keynesian
stimulus, down to the very last taxpayer’s dollar. When that runs out, well,
maybe I may have to change my mind.

I noticed this week that Rwanda had just
borrowed 10 year money at 6.875% despite only having a ‘B’ credit rating. I
also noticed this week a piece on Bloomberg that pointed out that central banks
were now busily buying equities with their reserves. To those who point to a
global financial system on the verge of flying apart courtesy of unparalleled
risk taking and the grotesque distortion being imposed on asset values via zero
interest rates designed to bail out insolvent banks and insolvent governments
by central banks gifted with all too much arbitrary power, I say: your fears of
hyperinflation are foolish and you are being stupid. There is no problem here.
All is well. Please move along now. The emperor’s new clothes do indeed look
fantastic. Pay no attention to the man behind the curtain.

The US deflationary recession of 1920 is an exception. Since it points
to the alarming occasion of a recession that was not met with a policy response
by Big Government and which therefore resolved itself very swiftly, it must
always remain an exception. Since it is an exception, it is therefore an
exception.

I met a fellow the other day – he struck me as something of a pompous
windbag – harrumphing along through life and mostly ignorant of economics and
economic history, not ashamed to resort to sarcasm, ad hominem insults, and all
the tools at the disposal of a barrack-room lawyer. Then I realised I was
looking in a mirror.

The all-powerful state must be protected. Even if it means destroying
all of its citizens along with their puny wealth. HULK LIKE ALL-POWERFUL STATE.
HULK CRUSH PRIVATE WEALTH. EXTERMINATE ! EXTERMINATE ! EXTERMINATE !

‘An economics correspondent’ is
a respected economics correspondent. But then so is Paul Krugman.

Follow me on twitter: timfprice

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