In Gold Wars, Swiss banker Ferdinand Lips sets out the case that gold and freedom are inseparable. Over 254 pages, he shows how governments fight against gold, a vital restraint on their spending and therefore interventions in the lives of free people.
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
He apparently never repudiated that work.
Lips’ book extends the argument considerably, exploring the reasons why the Bank of England sold so much gold under Gordon Brown and making the case for “the long overdue elimination of the IMF”, referring to the Fund’s “near perfect record of failure”. He describes the EU as “a centralist colossus with absolute and despotic powers.” He writes, “Europe is now undergoing the broadest experiment in planned economics since the decline of the Soviet Union.” And this in 2001.
I have always tended to insist on honest money that holds its value without mentioning “the g word”. For most of the past 5 years that I have been active in politics, “gold ” has been a word certain to end most conversations about economics. Last time I spoke at a dinner, I was berated for not mentioning it. Opinions are changing.
Lips ends his book by explaining that financial markets can only function satisfactorily under a gold standard and that the then contemporary explosion in the money supply was being used to prop up stock markets and save heavily indebted consumers. He said our financial system was in a precarious state but that “Smoothly functioning financial markets with savings channeled into productive investments bring the world economy to its full potential, increasing employment on a worldwide basis.” His vision is one of increasing employment and stable prosperity, one of narrowing global wealth inequality and greater political and social stability.
I am ever more convinced that money is the fulcrum of society. I am convinced that the fundamentally unsound monetary regime of the past century, and particularly since the end of Bretton Woods, has corrupted society economically, morally, culturally and politically. It is that monetary system which has brought us to this crisis and which is now failing at such profound human cost.
I am grateful to The Real Asset Co for making a gift of Lips’ book after our interview. Perhaps a high-quality financial order and a stable economy with sustainable, inclusive prosperity is possible apart from gold as money: this book indicates otherwise.
In yesterday’s Telegraph, William Hague tells the Government’s business critics to stop complaining and work hard to deliver jobs. However, Mr Hague forgets that a day’s hard work is rewarded with a day’s pay: if that pay is in a money which someone else is producing at near zero cost, the value of hard work is undermined.
People who are slogging their guts out to make ends meet in an environment of rising living costs are bound to take the Telegraph’s reporting of Mr Hague’s remarks badly, and rightly too. The comments on the article are well worth reading.
The original interview is here and there is some good in it:
Things went “wrong over decades”, the Foreign Secretary suggests, with the idea growing that people could “live on expanded debt forever, rather than having to earn what we spend.”
I have argued again and again that 40 years of credit expansion — lending money into existence well in excess of real savings, trebling the money supply under New Labour by expanding debt — is the fundamental cause of this crisis. It is the reason why the distribution of prosperity in our country is manifestly unjust, why wealth is concentrated around London and why the financial, building and state sectors are so dominant in our economic system.
In The Ethics of Money Production (PDF), Jörg Guido Hülsmann writes,
The prevailing ways of money production, relying as they do on a panoply of legal privileges, are alien elements in the capitalist economy. They provide illicit incomes, encourage irresponsibility and dependence, stimulate the artificial centralization of political and economic decision-making, and constantly create fundamental economic disequilibria that threaten the life and welfare of millions of people. In short, paper money and fractional-reserve banking go a long way toward accounting for the excesses for which the capitalist economy is widely chided.
Elsewhere in the book, Hülsmann explains the depth and extent of the damage done by money which is produced by expanding debt. At last a senior member of the Government is beginning to discuss similar ideas.
Senior politicians must realise that hard work cannot produce prosperity without the right institutions. In addition to Adam Smith’s “peace, easy taxes and a tolerable administration of justice”, hard work must be rewarded with honest money which holds its value, not money which the commercial banks and the Bank of England can produce at the touch of a button.
Money loaned into existence in ever greater quantities caused the present crisis. It has given us a society based on crushing burdens of work in exchange for rewards which quickly disintegrate. That is the problem which must be solved if hard work is to have proper meaning and if we are to have a moral and just society which delivers prosperity for all.
Effective government is not simply a matter of management. Even in good times, competence is barely enough. In bad times, ideological clarity is imperative, and the lack of a clear, ideas-based strategy is the black hole at the heart of the coalition administration.
This chart is particularly informative:
Click for report
They comment, “The centre-right is in desperate need of a new ideology, and this, we believe, needs to be based on a commitment to the wholesale reform of capitalism.”
Indeed and that reform must be based on the understanding that it is money itself which has failed, creating a financial crisis, an intractable bust, an unjust distribution of wealth and other grave problems which undermine the basis of our society. It is because money has failed that further monetary activism is not working to produce a recovery. In so far as a resumption of an accelerating increase in the money supply would produce an economic boom, it would be one which risked an inflationary destruction of the currency.
I’m an enemy of Keynes’ flawed ideas, but he was no fool. His preface to the General Theory set out how his main purpose was to cause economists to question the basic assumptions of economic orthodoxy. He finished his book by asking whether the fulfillment of his ideas was “a visionary hope”, famously writing,
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
Today, he is that defunct economist. By enabling an economic orthodoxy which understates the importance of time, his ideas (amongst others) legitimise a neglect of the structure of capital and the origin of interest rates which together enable the monetary activism which brought us to this point, which is not working now and which threatens to make the crisis worse later.
It is again time for economists to question the basic assumptions of their orthodoxy.
Our vision is of a peaceful, open and free society based on a stable, sustainable economy in which everyone has the opportunity to participate in constantly growing real prosperity.
Based on sound scholarship, we argue that such a society must be built on honest money.
Honest money means an end to credit expansion and false booms followed by financial crises with appalling human cost. It means an end to inflation of the money supply and hence prices. Honest money is the key to social progress in the 21st century.
Tullet Prebon are right that a new big idea is required. The Big Society is a good one, and I support it, but it is empty without monetary reform, for money is the basis of cooperation in society. All the while money remains broken, there will be no sustainable and just recovery. For those who want to question the basis of contemporary economic orthodoxy, I recommend starting with the primers here.
Two weeks ago in the Budget debate, I set out how “monetary activism”, which is one of the pillars of the Government’s strategy, could go wrong:
Steve Baker (Wycombe) (Con): I refer the House to my interest in Cobden Partners.
This is a Budget of fiscal conservatism and monetary activism. It is a Budget, above all, of economic expectations, setting out to people that we will reward work, support families, help those looking for work, back business and back aspiration. In the short time available to me, I would like to speak directly to the point of monetary activism, which is one of the Budget’s key pillars. I hope the Government will not take it as a criticism, because the Chancellor has emphasised that the Bank of England is independent and, of course, its policies are symptomatic of those followed all around the world.
Over the past 13 years under new Labour, the money supply expanded from about £700 billion in 1997 to £2.2 trillion in 2010. That was through a massive expansion of bank balance sheets—a huge amount of monetary activism led by central banks, with the Bank of England keeping interest rates too low for too long. That goes to the heart of points that Opposition Members have made. It has redistributed wealth towards the south-east and the first recipients of new money. I would say that it is at the heart of our difficulties. The scatter chart in the Red Book shows how the balance between our fiscal position and the bank balance sheet position is interlinked, and has placed us as an outlier.
When many people look at monetary activism, and quantitative easing in particular, they get worried about inflation—and why not? It would, however, be hysterical to worry about hyperinflation at this stage, when the asset purchase facility is at £325 billion—just one seventh of the money supply. I would nevertheless like to sketch out something that troubles me in my darker moments.
Right now, there is not a problem, but a housing bubble became a banking crisis—at least not a problem of inflation—which became a sovereign debt crisis, which has now been turned into an asset bubble in the bond market. The Bank of England has deliberately inflated bond prices in order to suppress long-term interest rates—interest rates that our constituents cannot do without because they are so indebted. The problem is that, as we know, all bubbles burst; the questions are when and what might burst the bond bubble. Inflation expectations might do it. If we were to look at M4 and M4ex from the Bank of England, there is no reason to doubt its inflation forecast. If we look at my preferred measure of the money supply, however, which is Kaleidic Economics MA, we can see that from July last year, year on year money supply growth was minus 2%; today, money supply is growing by that measure at plus 6%. We should thus be very cautious indeed about the Bank’s forecasts.
If the bond market bubble bursts, there will be pressure on the Bank of England to continue to prop it up. That will lead to further quantitative easing and create an expectation of rising interest rates. That could cause a flight from the bond market into cash; and it could cause the public, as they see QE continuing, to lose faith in cash itself, which could lead them to start spending.
Karl McCartney (Lincoln) (Con): Will my hon. Friend give us an idea of when he thinks this bubble might burst—in the near or the distant future?
Steve Baker: I am grateful to my hon. Friend, as this is a critical problem. It is a problem of expectations; it about the human mind, which is extremely difficult to predict.
I was saying that, as we go through, we could find that people lose faith in cash. If they do that, they will spend it, and move into real value. Keynesians could end up celebrating an apparent boom, but actually one that is a crack-up of the currency. I sketch these events not to frighten, but to set out a perspective for the House of which we should be aware when we know that the central banks and the Bank of England have deliberately inflated this bond market bubble.
We could end up facing a choice: if prices and wages are accelerating, but less quickly than the money supply, the Bank of England will have to choose whether to supply more money or whether to abandon that monetary inflation and reveal the underlying havoc created by decades of inflationary money. Perhaps new money, instead of real resources, can be used to paper over the cracks. Perhaps expectations can be managed to avoid the bubble bursting. If I were to quote with just a little adaptation something that Hayek wrote in 1932, I would say: “We must not forget that for the last 86 or 88 years, monetary policy all over the world has followed the advice of the monetary activists. It is high time that their influence, which has already done harm enough, should be overthrown.”
The quote at the end is derived from the 1932 Preface to Hayek’s Monetary Theory and the Trade Cycle, which is available in this collection (PDF). The truth is that little really new is happening in the world. The same bad ideas about monetary stabilisation which turned a correction into the Great Depression are still at the core of mainstream economics, thanks to the persuasive intellectual errors of Keynes and others. In 1932, Hayek wrote:
Far from following a deflationary policy, central banks, particularly in the United States, have been making earlier and more far-reaching efforts than have ever been undertaken before to combat the depression by a policy of credit expansion—with the result that the depression has lasted longer and has become more severe than any preceding one.
The five-page Preface is well worth a read for an insight into how little is really new in the world. It’s true that finance and financial theory are more sophisticated now, but the fundamental laws of cooperation in society are unchanging. What changes, is how we understand them and how, Canute-like, we try to escape the consequences of our actions with ever greater interventions by authority. It’s not a healthy trajectory.
Thankfully, these ideas are becoming increasingly mainstream. Just after I spoke, the BBC Radio 4 programme Analysis transmitted What is money? featuring my colleague Gordon Kerr. Given Detlev Schlichter‘s recent appearance on Start the Week and a range of other Cobden Centre media successes, I am increasingly optimistic that we may shift the terrain of the debate on the financial crisis and, eventually, deliver reforms capable of supporting sustainable prosperity.
Related reading:
Hayek, Prices and Production and Other Works (Kindle, PDF)
Mises, The Causes of the Economic Crisis: And Other Essays Before and After the Great Depression (Kindle, PDF)
Rothbard, The Mystery of Banking (hardcover, Kindle, PDF), especially pp66-74, which sets out how inflationary expectations can lead to hyperinflation.
Schlichter, Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown (hardcover, Kindle)
Two days ago, Greg Smith, a Goldman Sachs executive director, resigned in sensational fashion, writing a column in the New York Times. In the article, he laid out the reasons for his resignation, citing the change in culture at the firm over the ten years he worked there. He wrote,
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization.
In particular, he attacked what he sees as the 3 ways to get ahead at Goldman Sachs:
“persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.”;
“get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman”; and
“Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym”
While the article might have been dismissed as one disillusioned ex-employee’s rant, it will ring all too true across the financial sector. The Motley Fool reports Goldman Isn’t Alone in the Delicate Art of Ripping Off People. After quoting some illustrative returns, fees and rewards in the industry, the author writes:
The clients that Goldman and the rest of Wall Street rip off are skilled at ripping off their own clients, thank you very much. Each is part of the same game of inflating expectations and overcharging fees — a system summarized best by the title of Fred Schwed’s classic book, Where Are the Customers’ Yachts?
And then he points out that the losers, the client’s clients, are people like you and me: savers, pension fund beneficiaries and retired schoolteachers. The article finishes by asserting that Goldman is just one example of “putting personal interests before clients.”
How did all this come to pass?
In 1999, just over ten years ago, Goldman Sachs went through a public listing. It had previously operated as a partnership but now it is majority owned by institutional investors.
Over on Forbes, an article explains the difference in incentives between a bank run as a partnership and one run as a traded corporation: the switch in incentives is from long-term success to short-term results. The author gives some persuasive arguments for the partnership model and says investment banks should be required to return to it. He finishes,
Real banking reform isn’t about lashing out, but about restoring the connection between bankers’ profits and the economy they serve.
Which is why, as part of my work on injustice in the financial system, I introduced my Financial Institutions (Reform) Bill. The Bill would minimise moral hazard within the financial system by ensuring that those who take risks are held personally liable for the consequences. It would realign bankers’ rewards, their risks and their actions in the real economy. I said,
Hard-working families and individuals paying tax out of typically modest incomes must never again suffer the injustice of carrying the risks, and consequences of risks, taken in the pursuit of often enormous private returns. Risks must fall to those who take them. Instead of vicarious liability of taxpayers, there must be responsibility in the banking system. The Bill represents an opportunity to free the banking sector and the public from regulatory capture and lobbying. It could raise standards from the bottom up, through the preservation and extension of commercial freedom and the development of professional, personal and mutual responsibility.
At the time, I had no idea that yesterday I would meet David Fishwick, founder of a savings and loans firm in Burnley, who is delivering just that. It began when he found people could not buy from his van business for want of credit, so he started making loans himself. He’s an entrepreneur, a self-made multi-millionaire from ordinary beginnings.
Channel 4 are now making a documentary about Dave’s attempts to start a decent bank which serves both savers and businesses. The Lancashire Telegraph reports,
“My bank may be tiny but it will be better than a high street bank. I want to show how banking can be socially responsible and not greedy and reckless and I’m going to do what the high street banks just can’t bring themselves to do, give away any profits to charity.”
The venture will see him guarantee and underwrite all the banking activity from his personal fortune.
It’s quite a rebuff to all those who told me no-one would run a bank if they had to put their own assets at risk. As I pointed out, some of history’s greatest bankers bore their own risks without limit. Now, Dave Fishwick is demonstrating that the basic business of banking — intermediating savings to entrepreneurs through productive loans — is an enterprise which individuals will back with their own wealth.
Dave’s banking business is small. The FSA essentially won’t meet him and no wonder: they make their money from fees levied on those they regulate. Dave’s business is presumably too small to cover the FSA’s costs. So he doesn’t have a banking licence, accepting savings and making loans on a different legal basis. His business, as he tells it, is based on his personal guarantee, trust and entrepreneurship. In the terms Hazlitt explained, credit is something people bring to Dave, through running profitable businesses, and that’s what enables him to make loans out of people’s precious savings, personally underwritten by him.
Dave Fishwick may yet fail. His business may be crushed out of existence by a dull and clumsy state. But I have said time and again that we need a new generation of local financial institutions which reconnect savers and productive businesses. It seems Dave is redeveloping the teamwork, integrity, spirit of humility and sense of “always doing right by our clients” which used to engender pride and belief amongst Goldman Sachs’ staff. There will always be a place for large, sophisticated firms but, together with ideas like Funding Circle, Dave’s enterprise may indicate that a new, more responsible and productive financial system is emerging spontaneously in society.
I look forward to watching the documentary in the next couple of months.
I was glad to see Cobden Partners’ Gordon Kerr on Bloomberg yesterday, explaining why the Greek bailout will fail:
As I wrote elsewhere, the western world may be in a second crisis of state socialism, a crisis of the welfare state. It appears that politicians’ excess spending pledges over what they could raise in taxation have been covered indirectly by chronic credit expansion since the end of Bretton Woods. As Hayek, Mises, Huerta de Soto and others have explained, that was bound to lead to a banking crisis.
If this thesis is essentially correct, it may be that Greece is simply in the vanguard of a pattern which we should expect elsewhere. That implies a need for everyone who cares about peace and prosperity to think fundamentally and without fear or favour about our plight. That’s why I am proud to be associated with both the Cobden Centre and Cobden Partners.
He said the FPC would also look out for dangerous linkages in the financial system and identify exotic new instruments that might undermine stability. It would be charged with containing credit booms as well as limiting the damage of “credit busts”.
There can, of course, be little doubt that, at the present time, a deflationary process is going on and that an indefinite continuation of that deflation would do inestimable harm. But this does not, by any means, necessarily mean that the deflation is the original cause of our difficulties or that we could overcome these difficulties by compensating for the deflationary tendencies, at present operative in our economic system, by forcing more money into circulation. There is no reason to assume that the crisis was started by a deliberate deflationary action on the part of the monetary authorities, or that the deflation itself is anything but a secondary phenomenon, a process induced by the maladjustments of industry left over from the boom. If, however, the deflation is not a cause but an effect of the unprofitableness of industry, then it is surely vain to hope that by reversing the deflationary process, we can regain lasting prosperity. Far from following a deflationary policy, central banks, particularly in the efforts than have ever been undertaken before to combat the depression by a policy of credit expansion—with the result that the depression has lasted longer and has become more severe than any preceding one.
After a number of interventions about the futile search for stability and the breach of the rule of law inherent in the proposals, I said,
I very much welcome the Bill, which I hope and believe will prove to be the zenith of contemporary thought on bank reform. With due deference to my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), I wish to talk about three potential elephants in the room. First, I wish to make some remarks about accounting, then I wish to discuss the conduct of individuals and liability, and finally I wish to talk about financial stability.
I know that the Minister has heard my views on the international financial reporting standard, but I draw his attention to a letter in yesterday’s Financial Times by Lord Lawson, under the headline “Forget Fred and focus on the real banking scandal”. He stated:
“The auditing of banks’ accounts, however, is fundamentally flawed in itself. The IFRS accounting system itself has proved to be damagingly pro-cyclical, and the ability to pay genuine (and genuinely large) bonuses out of purely paper profits, which are never subsequently realised, is at the heart of both the bonuses that cause such public and political outrage, and the reason why bank management consistently does so well when bank shareholders do so badly.”
Andy Haldane, the executive director for financial stability at the Bank of England, gave a speech in December. I shall not read out all the remarks that I meant to cover, but he concluded by saying that
“if we are to restore investor faith in banking sector balance sheets, nothing less than a radical rethink may be required.”
He was referring, entirely, to accounting standards. I therefore refer the Government to my private Member’s Bill introduced on 13 May 2011, which seeks to introduce parallel prudent accounting for banks. It is a couple of pages long and I hope that it can be added to this Bill.
I also refer the Government to “The Law of Opposites”, a paper produced by the Adam Smith Institute and written by my colleague Gordon Kerr, who has spent 25 years “gaming accounting rules”, as he would perhaps say, in order to make a profit. The banking system is in a far worse state than is generally believed. I do not see how either the Financial Policy Committee or the prudential regulation authority can operate without a true and fair view of the state of financial institutions, and I do not believe for a moment that the international financial reporting standards give that to us.
On the conduct of individuals, we fail too often to think about the pattern of regulation in which we have engaged. It seems that the first thing that legislation does is to damage the incentives and disciplines of the market. Having thereby created moral hazard, regulators come along to try to mitigate the consequences of that moral hazard. A banking licence today is a licence to lend money into existence, at interest, with the risk socialised. When we look at central banking, deposit insurance and limited liability, we find that moral hazard is absolutely rife in the banking industry, even before we consider investment banking. I suggest to the Government that it is time to increase the liability of banks’ directors. There should be strict liability for them, and bonuses should be held in a pool and treated as capital for at least five years. I will introduce a private Member’s Bill to that effect on 29 February.
We have talked about financial stability and the difficulty of defining it. There has been a sense that there is some kind of equilibrium economy—an evenly rotating one—in which there could be a sustainable and stable quantity of credit. Indeed, on pages 14 to 16 of the Joint Committee’s report there is an interesting discussion about the need to regulate credit.
To leave time for my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), I will just say that if we were talking about any other commodity and were discussing adding to a failed regime of price control a regime of quantity control, we would certainly reject the idea out of hand. In Lord George’s testimony to the Treasury Committee before the crisis, he made it absolutely clear that the Bank of England had created a credit bubble to avoid falling into recession, yet we are going to give the Bank even more powers, more tools, [resulting in] more risk of ruin and more big-player effects and distortions of economic expectations.
I congratulate the Government on introducing the Bill, and I sincerely hope that it represents the absolute zenith of contemporary thinking on interventionist bank reform.
In the following video, my remarks begin at 21:31:
I should think society will learn, in the next few years, some important lessons about the use of arbitrary power by monetary and financial authorities. Hold tight.
In 2011, an important centenary passed pretty much unremarked. On December 16 1911, the National Insurance Act received royal assent. It was the well-intentioned Act that destroyed the friendly societies and entrenched state welfare.
At the time, British government spending was under 15 per cent of GDP. The World Wars pushed state spending to around 46 and 70 per cent of GDP respectively and the peacetime trend was established. From about a quarter of GDP in 1920, by 1970, spending grew to match Great War levels.
Governments have always paid for themselves through taxation, borrowing and currency debasement. Tax revenues shot up quickly from a few per cent of GDP in 1911 to 40 per cent in the late ’40s.
After a slight respite in the ’50s and early ’60s, taxation passed 40 per cent of GDP again in about 1970. It has stayed thereabouts ever since.
Having hit an apparent limit to taxation in 1970, governments did not restrain themselves: borrowing and currency debasement took over as they indulged in deficit spending.
Since Nixon ended the Bretton Woods system in 1971, the world has had an institutionally inflationary monetary system. The British money supply grew from a few tens of billions of pounds to £700 billion in the spring of 1997, before tripling to more than £2.2 trillion in January 2010.
With so much new money being loaned into existence, no wonder governments have been consistently able to run deficits. And no wonder wealth inequality has widened in the face of redistributive measures, real capital has been destroyed in the North and our economy has reorientated towards the source of new money: the City and the South East.
I believe the forces at work in this crisis run deeper than is commonly understood. For 40 years, the promises of politicians in excess of what could be funded through taxation have ultimately been paid for by increasing the money supply. That created an illusion of prosperity, fostered unjust economic processes and broke the banking system before the bubble burst.
The first crisis of state socialism was easy to spot: the Wall came down. One hundred years after the National Insurance Act set the trajectory of state provision, those of us serious about prosperity and welfare must look at the mess in the West and ask: “Is this the second crisis of state socialism?” We may not like it but the answer is “Yes.”
Last night, I caught up with Martin Wolf’s November programmes for Radio 4 Analysis, which you can find here. He offered a predictable blend of commentators calling for more money printing, world central banking and greater global governance. It prompted me to look out Monetary Theory and the Trade Cycle (1933).
Hayek wrote (emphasis mine):
It is a curious fact that the general disinclination to explain the past boom by monetary factors has been quickly replaced by an even greater readiness to hold the present working of our monetary organization exclusively responsible for our present plight. And the same stabilizers who believed that nothing was wrong with the boom and that it might last indefinitely because prices did not rise, now believe that everything could be set right again if only we would use the weapons of monetary policy to prevent prices from falling.The same superficial view,which sees no other harmful effect of a credit expansion but the rise of the price level, now believes that our only difficulty is a fall in the price level, caused by credit contraction.
All eerily familiar. And:
We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.
The truths set out by Hayek in that crucial essay – and in Prices and Production in the same PDF – are ever more relevant today. Yet, despite the evidence of the intervening 80 years, the Keynesians, and indeed the Monetarists, continue to peddle their interventionist policies and monetary statism. Their intellectual bankruptcy is plain but still institutions are regarded as august which hawk their poor ideas about money and bank credit.
The economic truths which Hayek set out in the 1930s are much neglected. It is high time that they were widely read by economists and businessmen and that the impoverishing ideas of Keynes which are now doing so much damage are laid to rest.
Gordon dealt with the flaws in IFRS, the reasons for the debt crisis, the case for hardening money, the need for international money in support of trade and more.
Later in the day, I said in the Commons that the Government’s response to the ICB report seemed to take accounting for granted, asking the Chancellor to consider the issue seriously in the forthcoming white paper.
