The price of everything

Led by donkeys

 

“How can we have this idea that Scots are thrifty and good with financial management  ?”

 

-       Comment on The Daily Telegraph’s website following news that Gordon Brown has been ordered to release information about his controversial decision to sell Britain’s gold reserves when Chancellor. The writer may also have been thinking about the collapse of the Royal Bank of Scotland and Halifax Bank of Scotland and Sir Fred Goodwin..

 

Writing in the Financial Times, Martin Wolf suggests that the financial and economic crisis has inflicted huge damage on the reputations of Britain’s two most significant recent political leaders, Margaret Thatcher and Tony Blair. That rather presupposes that the latter has any positive reputation left to defend. Not just within the confines of the UK but internationally, the reputation of politicians has probably never been lower. Forget the tawdry British expenses scandal, though that is bad enough; there is a more fundamental problem with our polity, and it is not just an alarming and justified lack of trust. Governments throughout the West have proven themselves functionally unable to steward their nations’ finances. Labour had already made the forced redistribution of wealth from rich to “poor” a core component of its policy since election in 1997 (the net income gain for the poorest decile in the UK has been 12%; the net income loss for the most affluent decile has been 15%. But poverty has now become an entirely relative rather than an absolute concept, defined as a level of household income below 60% of the median income, thus ensuring that within a socialist culture, the poor will always be with us, at least statistically if not in fact, no matter how affluent our society becomes as a whole. That culture bears the seeds of its own ultimate collapse; as Margaret Thatcher is rumoured to have said, the problem with socialism is that eventually you run out of other people’s money.) The more recent redistribution of the nation’s resources from taxpayers to banking interests, while comparably involuntary, revealed just how much government was in thrall to the banking lobby, but it was hardly restricted to the UK alone. The problem may be rooted in the structure of the modern democratic system, in which the electorate increasingly and inevitably votes for putative self-enrichment (call it bread and circuses, if you will) as opposed to sustainable and productive national investment. In the words of Hans-Hermann Hoppe’s book, democracy is the god that failed.


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Crack-up

“Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no-one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and an ineffectiveness of all traditional remedies. Everyone pays and no-one benefits. That is the full cycle of every inflation.”

 

-       Jens O. Parssons, ‘Dying of Money: Lessons of the Great German & American Inflations’.

 

“Is there any reason why the American people should be taxed to guarantee the debt of banks, any more than they should be taxed to guarantee the debts of other institutions, including the merchants, the industries, and the mills of the country ?”

 

-       Senator Carter Glass during Senate debate on the Banking Act of 1933 (the Glass-Steagall Act).

 

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

-       Winston Churchill.

 

Adam Fergusson begins his magisterial analysis of the Weimar collapse (‘When Money Dies..’) as follows:

“When a nation’s money is no longer a source of security, and when inflation has become the concern of an entire people, it is natural to turn for information and guidance to the history of other societies who have already undergone this most tragic and upsetting of human experiences.”

As Fergusson points out, studies of the period, of all kinds, tend to come with a common shortfall: they ignore the human element. Here, then, are some of the human stories recounted within his work..

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Don’t shoot the messenger

 

Marty: “You know in Greece they cut off the head of the messenger who brought bad news.”

 

Visser: “Now that don’t make much sense.”

 

Marty: “No. It just made them feel better.”

 

-       From the screenplay to ‘Blood Simple’ by Joel and Ethan Coen.

 

 

The commentary will be taking a short break next week and will return on Monday 22^nd March.

 

When you are a government and your finances are shot, pinning the blame on speculators as opposed to your own fiscal incompetence is always an option. Even that term ‘speculators’ may be overly contentious, though after the banking crisis set in, it’s now fashionable for governments to point the finger at all financiers since that helpfully distracts the electorate from the loathsome venality and brazen inadequacy of elected officialdom. (UK voters may wish to recall and give thanks for how the Usual Suspect inevitably rounded up whenever currency markets gyrate, George Soros, saved the UK from a fate worse than Sterling, namely the Euro. Masahiro Sakane, chairman of Japanese construction and mining equipment-maker Komatsu, conceded as much today when he expressed relief in an interview with the FT that Britain had decided not to join the Euro bloc.)

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