The Only Form of Permanence

Perhaps the first great lesson of economics, as emphasized by Henry Hazlitt, is that there is no free lunch. The second, courtesy of Frederic Bastiat, is that if it sometimes appears that there is one, it means that we simply have not looked deeply enough into the consequences of our attempt to enjoy it. The third, the joint insight of several generations of Austrians, is that the attempt to buy one for ourselves by resort to monetary manipulation is eventually doomed to fail. A cynic might say that the fourth and final lesson is that no-one ever wishes to abide by the strictures inherent in the first three rules.

Consequent to this, we habitual deniers are fated to an eternal round of wishfulness, hope, euphoria, doubt, disquiet, and despair as we set about to cook just such a meal without ever being sure that we have sufficient ingredients with which to make it, enough time in which to prepare it, or even whether our appetite for it will remain equal to its complete enjoyment if we do.

In a similar vein, we see the credit theory of the business cycle vindicated over and over again, though each time it unfolds in a guise just different enough in its superficial aspects to trick us into believing we have truly managed to break the shackles of inevitability—this time!

Institutions vary, language evolves, circumstances change: but the twin boundaries of Time and Capital never fail to set the boundaries of the humanly possible.

So, today, we find ourselves at a pass where it is just possible that all the various threads of that sprawling tapestry of self-deception which we have so assiduously interwoven these past 15 years in the quest for our free lunch, are about to unravel in such a way that, as each one shakes itself free, it helps unpick the knots binding those adjacent to it.



At the start of this century, China made its first, great, forceful strides towards modernity, dragging its crisis-cheapened neighbours in its train. A voracious demand for raw materials was unleashed, an overwhelming flood of finished goods was supplied in turn, and – according to the hazy precepts of ‘capitalism with Chinese characteristics’ – solid accounting, go hang!

In truth, we in the West did not get to enjoy the entirety of this surprising bounty, being robbed of much of the real value this offered us by our pathologically ‘deflation’-shy central-banking overlords, who were each determined that prices in the round should never fall, no matter what the cause. Nor did we need to strive overmuch to find new ways to pay for all the extra inbound shipments since, aided by the peculiarities of the international monetary system, we could readily borrow the means from our willing Asian vendors.

Nor did it matter that this was confronting us with higher energy bills. These were conveniently excluded from our central bankers’ preferred ‘core’ measures and so did little to distract them from their goal of boosting other prices. Our budgetary constraints were further relaxed by the buy-now, pay-later terms granted us by those Petropotentates whose treasuries were now running over with the windfall brought in by a soaring oil price.

On the Old Continent, meanwhile, with the introduction of the single currency – that trumpeted culmination of the post war elite’s cautious empire building – the Nomenklatura swore to the Sevillanos that they were now as well-set as the citizens of Salzburg, reassured the Riminesi that they were as rich as their rivals in Rotterdam, and – most egregious of all – persuaded the inhabitants of Piraeus that their productivity was on a par with their peers in Paderborn. And if those south of the Rhine couldn’t quite earn the means to make good on these pretensions, well, at least they could now finance the difference at Teutonically low rates of interest.

For us Anglos, it was the case that the bulk of our (non-fuel) domestic prices could only be held from falling by a vast infusion of home-grown credit. Conversely, our foreign suppliers could only prevent the price of their exports from rising to a demand-sapping degree by printing whatever local monies were needed to offset the upward pressure being exerted on their currencies. For the Europeans, now all using the same money, the latter possibility had been legislated away and the necessary transfer which was its alternative had been made quasi-automatic. This meant the process became all the more insidious for being largely invisible when times were good.

Between us, we each managed to foster our own little boom in that quintessential outlet for overabundant credit, real estate. This being the good with which the ordinary man can most easily play the game of leveraged speculation, the real-life version of Monopoly once again showed its tendency to become endemic, dragging us all, willy-nilly, into the frenzy.

In the upswing, few of us worried that the chase to secure our desired pile of bricks-and-mortar was something of a Ponzi scheme, the thing itself being largely unremunerative to owner-occupiers. In the savage downswing which followed, we again learned to rue that same lack of income even as were once more harshly reminded that Francophones call ‘property’ ‘immobilier’ for a reason.

Finally, to cap it all, as the inflationary boom rolled on, both the selective rise in prices and the increased pace of activity which ensued acted to pour more and more taxes, tolls, and duties into the coffers of the state. Inevitably, it was not long before political discipline – never the most reliable guarantee of good housekeeping – became badly weakened.

Pharaohs these days have no Joseph urging them to limit their doles in the seven fat years so as to be better prepared for the seven lean to follow. That sort of temperance now comes under the pejorative rubric of ‘austerity’ and is, apparently, an affront to human dignity, never to be inflicted upon the teeming welfare masses. So it was that public payrolls grew bloated, numerous long-lasting entitlements were showered upon the electorate, and boondoggles and bridges-to-nowhere everywhere multiplied. Few contemporary quibbles were heard that this meant that the fisc’s expenditures were outstripping its swollen revenues and that it was also therefore dining far more heartily than it could really afford.



For a decade or more, then, as each new consignment of goods was sent out around the world with a conveniently detachable IOU hung about its neck, it seemed we were living the Yorkshire Tyke’s dream; that we could truly ‘Eat all, Sup all, Pay nowt’. Contrary to the grumblings of the Dismal Scientists, lunches were everywhere deemed to be free.

Instead, we are now rapidly discovering that not only does the chef insist that we settle our tab in full, but that those of us who became entranced by the sight of his perennially busy restaurant have spent our time in, and devoted our efforts to, building too many duplicate establishments, forging too many sets of cutlery for their tables, and growing too much food for their kitchens.

In response, our central bankers are issuing us with more and more luncheon vouchers while simultaneously laying down ‘macro-prudential’ rules to dictate when and where we may put them to use. Our governments have become impaled on the barbed, unidirectional thorns of state spending whereby one penny cut from the schedule in this phase of the cycle elicits many more howls of protest than the pound added in the opposite phase was ever rewarded with cheers.

Trapped in this snare of their own devising and slaves to the vociferous high-priests of the cult of a certain long-defunct economist, our rulers are reduced to trying to subsidize the failing restaurants by expropriating the earnings of the successful and to seeking to satisfy the cravings of the more importunate customers by stealing bread from the platters of the more self-reliant and thrifty.


In the face of all this, some of us are left with bellies groaning from gluttony: some have grown lean from being overly fastidious with the choices on the menu. Not everyone has been able to secure a booking and the count of those unable even to aspire to one is beyond telling. Regardless of which group we belong to, however, it seems a great many of us will go hungry—and the chef at last go unpaid—in the months and years ahead.


As each new consignment of goods was sent out with a conveniently detachable IOU hung about its neck it seemed we were living the Yorkshire Tyke’s dream, that we could truly ‘Eat all, Sup all, Pay nowt’. Aided by the peculiarities of the international monetary system, we in the West did not strive overmuch to find ways to pay for this surprising bounty but, gulled by our superstitious central banking overlords who were determined to rob us of the extra real value this offered us by preventing its price from ever falling, we borrowed the means instead. As each new consignment of goods was sent out with a conveniently detachable IOU hung about its neck it seemed we were living the Yorkshire Tyke’s dream, that we could truly ‘Eat all, Sup all, Pay nowt’.


Sean writes ‘Money, Macro & Markets’ as well as ‘Midweek Macro Musings’  in collaboration with HindeSight Letters, both of which can be found at