Ambrose Evans-Pritchard: With the US trapped in depression, this really is starting to feel like 1932

AEP is a deeply frustrating writer because although he seems capable of understanding what is happening in an almost Austrian-lite fashion — with the proviso that he needs to shift copies of The Daily Telegraph to pay his own wages — his proposed solutions are usually of the Keynesian-lite variety.

This is like being able to spot a fire at a petrol station and then to suggest that the pumping of more gasoline onto the conflagration may create such an explosion that it blows out the flames; at best, it’s wishful thinking and at worst, it is highly dangerous.

AEP is at it again in his latest think-piece article:

“Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.”

This is something that even Peter Schiff could have said on one of his radio programmes. But then AEP goes and spoils it with the following paragraph, which could almost have been sent back in time and translated from the original French by Marie Antoinette:

“It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.”

So we cut back on government spending via the sovereign bond market and we cushion this by increasing government spending via the quantitative easing printing press? Yes, AEP really does want to have his cake and eat it.

But it gets worse:

“Perhaps naively, I still think central banks have the tools to head off disaster.”

Translation: Whatever the problem, print more money (or do the same by moving ones and zeroes around a computerised financial asset ledger) to solve it.

This one-shot solution approach to any financial problem reminds me of the old phrase about ‘The King is Dead, Long Live the King!’

The modern equivalent is ‘Quantitative Easing Has Failed, Roll On the Quantitative Easing!’