Another excellent piece from Mr Liam Halligan, in this morning’s Sunday Telegraph, who has spotted where all of that money — that Ben Bernanke has been printing — has been piling up in great snow drifts of paper. In my own Rothbardian view, this is out of the United States — before the dollar collapses — and into real commodities which cannot be printed from thin air, which will therefore keep their value in the human needs chain, even when the world’s central bankers start running all of their printing presses all of the time to create the final stage of the crack-up boom initially instigated in 1971 by Richard Nixon’s decision to engage the world in a pure fiat money experiment.
So has Chairman Bernanke created the wave of world revolution sweeping the world, with the increased food prices behind these revolutions being caused by his obsession with the printing press as the solution to all known problems?
Well, Mr Halligan is orthodox enough to avoid going quite so far as we far less restrained followers of the author of Man, Economy, and State. However, he has gone further than anyone else I have yet to read in the MSM, including even our friends at The Guardian, who tread a curious line between praising Keynesianism (i.e. money printing) to ‘grow’ worldwide economies, while at the same time decrying the world’s rises in food prices which are primarily caused by money printing (though they would prefer to say ‘freak’ weather events, to fit in with their ‘global warming’ paradigm which has been causing all of this deep snow and freezing temperatures in North America).
Oh what it must be, to be a writer on The Guardian. You’re half right, half the time, but the socialist world view keeps making you miss the punchbag, even though it is standing right there in front of you. Poor loves.
Getting back to the brave Mr Halligan, here are three cherry-picked quotes to tempt you to read his full piece.
We start with the good:
“Fears about events in Egypt disrupting the Suez canal may also be overdone. This iconic supply route remains open and is now augmented by the more important Suez-Mediterranean pipeline. Given the predominance of Asian rather than Western demand these days, the Suez route out of the Middle East is anyway of much less relevance to global crude markets than it was back in the 1950s.”
Now for the bad, which includes a great Misesian word (for bonus marks, see if you can spot it):
“Despite this relentless demand, commodity supply chains – including mines, wells and processing plants – have lately been hit by a lack of capital investment, courtesy of the credit crunch. That’s why the prices of many economically-important commodities – not only sugar and cotton, but also copper, palladium and tin – are already well above their mid-2008 peaks. It strikes me as axiomatic that crude will eventually follow.”
And here’s the plain downright ugly:
“Consider also that crude reached almost $150 a barrel in 2008 without the hideous backdrop of a potential implosion of the Middle East. In 2008, the world had also yet to witness the grotesque Western policy of virtual money printing – or ‘quantitative easing’.”
There is another excellent piece in today’s Sunday Telegraph, from Mr Liam Halligan, summarising the end game situation at the recent Davos power elite comedy hour. I shall limit myself to cherry-picking just three quotes, one for each Marx brother.
Here is Groucho, always running away from his obligations:
“Yet while the grand-standing and finger-pointing should stop, it is absolutely not time to “move on”. The structural banking reforms we so desperately require are still a very long way from being agreed. The chances now are, given the Davos mood music, that they never will be.”
Here is Chico, preferring a good tune to actually ever achieving anything:
“Yet the actual document [Basel III accord] is so full of fudges and escape hatches that it amounts to very little. The only concrete policy – requiring banks to hold more capital against potential losses – doesn’t kick-in until 2018. Other measures designed to prevent future crises – such as liquidity standards and a global resolution mechanism for failing firms – have been postponed, allowing banks to carry on pretty much as before.”
And here is Harpo, silent but deadly:
“The question of “too-big-to-fail” remains entirely unresolved. And it looks as if we’ve now passed the high watermark in terms of Western leaders’ appetite for genuine banking reform. The country that should worry most about this grim reality, it pains me to write, is Great Britain.”
The excellent Mr Liam Halligan is back on form again with another superb article in today’s Sunday Telegraph.
In a smörgåsbord of delights, let me tempt you with a few tasty titbits:
“For more than two years now, opinion formers in the UK and elsewhere have been transfixed by City bankers and their academic lackeys who’ve argued that, far from inflation, we face “deflationary” dangers instead. Their cure, conveniently, has been for central banks to “print money”, issuing electronically-created credits then using them to bail-out said bankers. Such “quantitative easing” has also, handily enough, helped cash-strapped governments as the credits have similarly been employed to buy sovereign debt to fund “Keynesian” fiscal boosts.”
D’Artagnan would have been proud of that thrust. Porthos would like a stab too:
“Inflation won’t only mean that the Bank of England has to raise interest rates, compounding the difficulties of Britain’s highly indebted consumers. Rising price pressures also make it harder to justify more QE – not that it was justifiable in the first place, at least not to anyone with the capacity for independent thought.”
Not to be outdone and swishing in with his own sabre, Athos swings over the balcony with this:
“So the credit crunch, along with the deepest Western recession in generations, wasn’t the result of regulatory myopia and massive financial fraud. It has nothing to do with the Western world keeping interest rates too low for too long, or our governments and citizens spending like crazy, gorging ourselves on debt. The “global imbalances” thesis says it wasn’t us, it was “them” – China and all those other cheating Eastern countries that had the audacity to produce and extract goods the rest of the world wants, run current account surpluses and build themselves a platform of economic stability.”
And finally, Aramis ducks under the crashing chandelier with this tangential coup de grâce:
“Within the next 18 months, at least one peripheral country will leave the euro and Germany will do nothing to stop that. And once that’s happened, it could be followed by several more.”
All in all, and one for all, another splendid jaunt from the pen of Mr Halligan.
As a hardcore Rothbardian myself, I could quibble with one or two of the things that Mr Liam Halligan has written in his latest Daily Telegrapharticle on money. However, let me avoid being churlish, because most of it is excellent and can be safely read whilst wearing your favourite Skinny Rothbard Tie. Here’s a small selected sample:
In the current edition of Standpoint magazine, Professor Tim Congdon refers to me as a “monetary conservative of the backwoods persuasion”.
He argues that this column’s description of quantitative easing as “a polite, yet intellectually dishonest name for money-printing” amounts not to a reasoned point of view but, instead, belies an “implicit prejudice”.
…
Modern capitalism, at its core, relies on the public’s trust of fiat money and the sanctity of contract. QE is seriously undermining both those cardinal concepts. We’re not supposed to call QE “money printing” because money printing is the last refuge of declining economic empires and banana republics. It also amounts to state-sponsored theft. And against that, yes Professor Congdon, I declare an “implicit prejudice”.
Given his Irish name and ancestry, you might expect that Liam Halligan has a view on the events in Ireland over the last week or two. Well, if you did expect this, then you would be right to do so:
The European bigwigs are forcing a bail-out on Ireland not because the Irish state is bankrupt but because, as Ireland faces up to the extent of its banking sector losses, other nations aren’t yet willing to do the same. The Irish are discovering, once again, how it feels when a spirited and determined people are denied their own sovereignty.
The usual level of excellence and sense from Mr Halligan, in the Telegraph. Here’s a quote:
This crazy money-printing is going to be seen as the primary cause of Western inflation, food riots and a commodity price spike. This policy, in my view, is nothing less than America’s “economic Suez”.
Another excellent piece from the pen of Liam Halligan, in today’s Telegraph, describing the woeful under-reporting of the thoughts of Mervyn King, the Governor of the Bank of England:
Despite these realities, profligate “Keynesian” solutions are being peddled by economically-illiterate politicians and their academic courtiers…
…When speaking in New York on Monday, King savaged the bailed-out investment banks, accusing them of “financial alchemy”. The previous and on-going dependence of many such institutions on short-term debt he dismissed as “extraordinary – indeed, absurd”…
…But it was King’s description of the Western banking system as a whole that packed the biggest punch. “Of all the many ways of organising banking,” he remarked, “the worst is the one we have today.”
As Halligan states in his piece, this parting shot from King may be the one that eventually rings out around the world.
For those who want to peruse the whole King speech, here is the full PDF text, much of which appears to have been written by Toby Baxendale.
I actually like the phrase King uses just before the line reported above:
But I am reminded of Keynes’ dictum that “practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist”. Of all the many ways of organising banking, the worst is the one we have today.
Mervyn King, “Banking: From Bagehot to Basel, and Back Again”, New York, Monday 25 October 2010
King, it would appear, is breaking cover.
This might indicate that not only has King been secretly reading Baxendale, but that he has also been watching the following video and wanted to provide me with another flimsy excuse to publicise it:
Another brilliant piece from Liam Halligan on the inadequacies of the UK’s feeble coalition government, which is dressing itself up as a sheep in wolf’s clothing.
On Wednesday we were told that 490,000 public sector workers will lose their jobs over the next five years. That sounds like a high number and, despite natural wastage and redundancy deals not available in the private sector, this cut will be painful for many of those involved. But it represents merely a return to where the public sector headcount was in 2005. That is by no means a historic retrenchment.
While the US has doubled its monetary base over the last 18 months, the UK’s base money supply has tripled. That’s right – UK base money is now three times bigger as a percentage of GDP than it was at the start of 2009. Given all that money-printing – sorry, QE – the danger is that inflation expectations take hold, and price pressures spin out of control.
For now, a lot of the UK’s QE money remains “inert”, and therefore not yet inflationary, seeing as the banking sector has so far refused to lend it on to firms and households – one reason the UK economy remains so weak. That will continue to be the case, in my view, until the banks have black-mailed the British government into following America’s “lead”, and expanded QE to include the purchase of toxic corporate “assets” as well as government bonds.
Eventually, though – and it may not take long – the huge expansion of the UK’s base money supply will cause broader monetary aggregates to balloon as well, even if credit creation multiples remain relatively subdued. The QE money is out there and is almost impossible to withdraw. Once that money gets into circulation, and is leant against many times over, the UK could face “stagflation” – when high and rising inflation combines with an economic slump.
Liam Halligan writes another excellent piece in today’s Telegraph. Here’s my favourite quote:
In the UK, senior Labour politicians, who earlier in their careers showed signs of economic literacy, are peddling the same economic snake oil [of piling debt on ever more sovereign debt]. Ireland shows the “extreme dangers of austerity”, they say. That’s the message, of course, they must deliver to their public-sector union paymasters – manipulative, selfish men who represent less than a fifth of the British workforce. Senior Labour figures should know better – and they do! They’ve simply allowed their intellect to be trumped by their ambition.
