Thursday, September 19, 2013

A Money Printing Advocate Offers His Confession of Faith

By Bionic Mosquito

The business news world is aflutter today with examination of the Fed’s decision to stay the course, after all of the talk – none from the official Fed, mind you – of the possibility of “tapering,” in an undefined sort of way.

When the Fed said stand pat, the markets all went haywire, in every appropriate direction.  As an aside, this is a great example of why a small cabal should not have control over the single-most important prices in a division-of-labor, capital-dependent economy.

But to Ambrose Evans-Pritchard, popular financial columnist with the UK's, The Telegraph, he, too, is offering his reaction.  He is quite supportive that the Fed is continuing to provide unheard of support five years into a supposed recovery.  Nothing to see here – this isn’t worthy of comment.  We knew this is what he would say.

But buried in his laudatory article is his confession of faith.  Ambrose reveals why he prescribes the measures he prescribes – intervention, loose money, pro-active central banks, experiments, etc.  In other words, for Ambrose, he provides the faith behind why his answer to every economic hiccup is “print.”

What is his confession?  Is there a scientific approach to his viewpoint? Has he read the great economic scholars – charlatans to me, but at least some foundation?  Does he rely on models, formulas, statistics – again, meaningless in economics, but at least mainstream-acceptable tools of the trade? 

What exactly is his basis for recommending what seems to me a path to continued calamity?

The question is whether the public welfare is best served by popping the bubble and allowing Austro-liquidation to purge the toxins, or whether this would be ruinously destructive. Many readers think it is past time to dynamite this edifice. I have much sympathy with this view. Yet in the end, I prefer magic.

Magic.  This is the basis for his economic worldview.  Magic.

I guess I can at least congratulate him for his truthfulness.  That’s something.  I also note: he is not ignorant of the Austrian position.  This will serve him well when he gets to write the post-mortem of this grand, horrendous monetary experiment.

He goes on to explain the roots of the problem, which, of course, are not the roots of the problem.  He suggests different ways that central banks can inject money, not just to banks, but also to the little people.  For today, this is not worth examining.  How can I use reason to compete with magic?

But he does touch on something which I am certain is coming:

Lord Turner, the former chief of the Financial Services Authority, is tentatively pushing this idea, asking what is to stop the Bank of England writing off its Gilt portfolio, financing "prior" deficits. This could be done with a flick of a switch, reducing Britain's sovereign debt to a manageable 67pc of GDP at a stroke. The US could do much the same.

This will happen, but not for economic reasons.  It will happen in an attempt to retain faith by the masses in regulatory democracy – this being the single-most important tool in the toolkit of the elite, as I have previously discussed here:

So what’s next?  So-called austerity hasn’t worked.  Inflation won’t work.  I keep in mind, for the elite control is the most important – control is best exercised through regulatory democracy.  The worst thing that can happen to the elite is for the people to lose faith in this system – a system designed to sheer the sheep with the sheep’s blessing.  Regulatory democracy is the best thing going for the elites to work through in exercising control.

The only way this will be possible is through sovereign default, I believe.   The people will cheer – “our government stuck it to the rapacious banksters.  Praise be to the state.”  In no time, the elite will ensure that lending to the state begins anew – the best creditor is one with no debt, after all. 

But back to Ambrose and his faith: magic.  At least he has the courage to say it.  Sooner or later, the rest of the Keynesian-monetarist-supply-siders will have to do the same. 

The above originally appeared at Bionic Mosquito.

1 comment:

  1. "How can I use reason to compete with magic?"

    A question for the ages.

    Sadly, a good percentage of human kind still prefers magic to reason and/or reality. Truthfully though, hasn't this issue plagued humanity for quite some time?