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Economics

Eyes wide shut

Our friend and Advisory Board member Ben Davies of Hinde Capital has produced a two-part report entitled Eyes Wide Shut covering the state of the UK’s financial health.

Nations sustain prosperity by encouraging an openness of society, willingness to permit creative destruction and democratic rule of law. It is the relationship between man-made economic and political institutions that fosters these aspects of the nation. Those that promote real growth through productivity enhancement and encourage progressive innovation will thrive; those that move towards repressive institutions of the State will stagnate and fail.

Unfortunately this is where the UK is heading today. Mounting debt that has merely boosted government consumption and transfer payments have undermined the overall productivity growth and led to economic stagnation and loss of economic freedom.  Unfortunately, we believe that a nation will tend to bankrupt its citizens before it bankrupts itself; especially under a fiat currency system when it has the temptation to fund a welfare state through continued deficit financing.

Both reports are well worth reading:

  • Part I. The UK Hitting the Wall (PDF)
  • Part II. UK Economic Repression and an End Solution (PDF)

You may also enjoy Ben’s introductory blog posts (Part I, Part II), and his appearance on CNBC:

Finally, you can find Ben’s thoughts on the PIIGS and the potential remonetisation of gold here.

3 comments to Eyes wide shut

  • Paul Marks

    But Sir, the establishment (the government, the administrative structure, the universities and the rest of the court intellecutals, the media such as the Economist magazine and Financial Times newspaper…..) are all agreed……

    Our problems can be solved by YET MORE “demand” – “lower interest rates” more “quantative easing”, more money created from NOTHING.

    And most of the City (and other fiancial centres) agree – after all stock market prices tend to go up when another corporate welfare orgy (sorry I mean another “scientific increase in demand”) is announced.

    The only dissent in the establishment is not over the wonderful idea of yet more “monetary stimulus” – no the dissentors (Krugman, Stiglitz ….) want yet more government spending (“fiscal stimulus”) as well. There is not enough government dependancy, government must be even bigger……

    And when all this wonderfull “monetary and fiscal stimulus” leads to economic and social collapse will the elite (the academics and so on) admit error?

    Of course not.

    A few bankers and other City people will just be thrown to be torn to pieces by the hungry mob – for committing the terrible crime of doing exactly what the government asked them to do.

  • Paul Marks

    Listen to the opponent.

    His answer is that M0 (the monetary base) is being expanded to save the credit bubble (“broad money” M3 and so on).

    And he sees nothing wrong with this.

    That is the mindset you are dealing with.

    Someone whose reaction to a vast credit bubble is to say “oh well the Central Banks should create more M0 in order to support the M3″

    Job done – no problem.

    And that (insane) mindset is that of (post World War II ) Chicago as well as Cambridge.

    Milton Friedman would have said that – just as much as Lord Keynes would have.

  • John (@Only_Red_White)

    At long last I have seen a statement to which I have long believed – the government(s) of this country are bankrupting its citizens. I am not an economic expert I just see things more as they are rather than what we are told – I am retired just trying to keep my head above the water and minding my own business.

    Tax in some form increases every year (not necessarily directly but the fact that oil or gas etc go up then so does the tax take) and all they worry about is inflation. The inflation figure is a crock of sh**. The fact that it might go down at intervals is welcomed as a ‘we are OK now things are less expensive’ – excuse me!! The fact that things go up hugely is forgotten after a year and yet the majority of people have had no increase in salary (and maybe dont even have a job now) or if they had its gone in fuel or gas or electric etc.

    All inflation does is in government terms is make them believe that the debt is now not quite as much.

    I walk a lot with my pair of dogs through housing and high streets areas and I see depredation everywhere – no maintenance of houses, roads, cars, gardens, footpaths, drains, the kids are poorly dressed, often yobish in nature due to parents working for a pittance or just fed up and on the dole so the kids are kicked into the street, you name it. Then of course the high street is in melt down (wait till the insurance companies really own up to realistic valuations in their pension portfolios of high street property) – the citizens of this country are well on the way to bankruptcy.

    I have had had a theory for several years that in about 40-50 years this country will be more socialist than any states like Russia or China ever were deemed to be – we will be given credit notes to exchange for food as there will be no money left that does not go directly to the government to pay for debts or just to administer total control of the population. The notes will not be money just to make sure everyone gets something to eat – rationing.

    Probably we will go down this route via nationalisation of the banks, then water, electric/gas production, transport, etc

    What a mess!