Thursday, 16 October 2008

Sound as a pound in the ground?

If there was a standard for irony Dominic Lawson would have just violated it.  Dominic's dad, Nigel Lawson, was the Chancellor who so inflated Britain's money supply in the mid-eighties that the bust his boom created lasted nearly five years.  Lawson pere may not be an advocate of sound money, but Lawson fils sure is.

In the Independent newspaper he writes of Gordon Brown's bailout --

    When Governments spend vast sums of money to shore up the banking system, you just know that it would be all too convenient for it to let inflation erode the national debt incurred in the process. Even before these gigantic expenditures, Britain's true level of national debt, according to the economist Liam Halligan – the Government won't give the real figure including off-balance sheet liabilities – is over £1,300bn. This is equivalent to £50,000 per household. Perhaps Gordon Brown might call it "imprudence with a purpose" – he dumped Prudence some time ago, although he kept on telling everyone that they were still an item.

-- and concludes with a paean to sound money, and to the man who more than anyone else was the twentieth-century's leading advocate of sound money:

    There is, however, a small band of men and women ... who can now say: "We told you so." I am not referring to the Communist Party of Great Britain (Marxist-Leninist). No, I'm talking about the followers of the great Austrian economist Ludwig von Mises (1881-1973). in his 1912 work, The Theory of Money and Credit, Mises declared that the corruption and distortion of money by the state and bankers ... was the principal cause both of inflation and – to coin a phrase – boom and bust...
    As the chief economic advisor to the Austrian government in the 1920s, Mises put his theories into practice and slowed down inflation in his native country (which, as a Jew, he later fled). He used his "cycle" theory to forecast that the "New Era" of apparently permanent prosperity in the 1920s was illusory, and that it would end in runs on banks and depression: The Wall Street crash of 1929 was exactly what Mises had predicted.

And the Misesians predicted the present crash as well -- as you can see by checking the 'Who Predicted This?' section of the Mises Institute's Bailout Reader.

    Mises' followers insist that the present problems in the economies of the West have not been caused by laissez-faire, but by the opposite: politically sensitive central bankers so desperate to prevent any stock market slump that they cut interest rates to a level which turbo-charged the debt markets. So when George Osborne, as he did yesterday, declares that "laissez-faire is dead", the Mises-ites – one of whom is the libertarian ex-Presidential candidate, Congressman Ron Paul – would protest that such a policy was never tried in the first place...
    The Government will insist that it is no time to be debating economic theories and the origins of this crisis – that we should simply do what we can to inject confidence back into the system. Professor Polleit sees it differently: "A proper diagnosis is necessary before you know the right remedy. Your Government – and others – are dealing with the symptoms but not the causes." As any doctor will tell you, that is not in the patient's long-term interest.

Read (and reflect on) the whole piece here.

UPDATE: Liberty Scott spotted this great satire on Gordy's bank bailout: British banks to lend you your own money

Satirical website Daily Mash has an excellent take on the UK government's recent welfare subsidising nationalising handout to banks:
"THE government is to invest £500bn of your money in British banks so they can lend it back to you with interest"
The best line has to be this:
"Meanwhile, Emma Bradford, a sales manager from Bath, said: "Why doesn't the government just give my money to me so I can buy stuff from businesses who will then make a profit and put it in a bank?"
But Mr Darling insisted: "Shut up.""


  1. "British banks to lend you your own money..."

    Though we learned it from the Brits, we are taking the insanity one step further: forcing the money on bankers who don't want it!

    See here.


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