Belatedly, thanks to site crises, I’m linking to Nicholas Gruen, who organised this article in Wednesday’s Fin, signed by 21 prominent economists from across the political spectrum (text over the fold).
Combined with the good GDP number released the same day (I discussed it at Crooked Timber , this letter does as Peter Martin says, leave the opposition looking naked. They haven’t really offered any analysis to justify their opposition to economic stimulus, and unless the rest of the year brings really bad economic news, it’s hard to see them recovering any credibility on economic issues. Unsurprisingly, the government ran with it in Parliament , and the best Joe Hockey could do in response was to sneer at Bernie Fraser.
In Paul Krugman’s words, right now, “knowledge is our only defence against catastrophe”. A natural reaction would be to retreat into timidity. But that would repeat mistakes that exacerbated the Great Depression by giving in to our fears and phobias. IMF Chief Economist Olivier Blanchard has a similarly blunt message. “Above all, adopt clear policies and act decisively. Do too much rather than too little.”
Of course other things being equal it’s better for governments to be debt free. But as any homebuyer knows, debt can help us build assets now that we couldn’t otherwise afford, and repay the costs when the assets bear fruit. Australia entered this crisis relatively well placed to weather the storm. In addition to the recent mineral boom, for twenty five years Australian governments have consistently stressed fiscal responsibility and taken large political risks doing what they thought right for Australia, for instance with tax reform and fiscal austerity during the mid 1980s and again in the mid to late 1990s.
Many developed countries were already running cash deficits and had substantial public debt before the financial crisis. However all of them have accepted one lesson of the Great Depression – that during a downturn we should let the ‘automatic stabilisers’ work by loosening budgets temporarily as revenue falls and outlays on welfare relief increase.
Given Australia’s relatively stronger balance sheet, it’s been in a better position to engineer additional discretionary fiscal stimulus than most comparable countries. Cash handouts of nearly two percent of GDP are being paid to middle and lower income Australians. There is no more effective way to stimulate the economy quickly. The success of this measure can be seen in the relative strength of Australian retail sales compared with almost any of our peers. In addition the Government plans to spend many billions more on infrastructure.
All this has converted a sizable expected cash surplus next financial year into a deficit of nearly 5 percent of GDP. This compares with the average of our peers of nearly 9 percent. On current Treasury projections, which seem as plausible as any (though like all such forecasts, they are only ‘best guesses’), net debt will stay below 14 percent of GDP compared with an average of over five times this in comparable countries which nevertheless retain their creditworthiness in capital markets. Ultimately if other countries run weaker balance sheets than us, that’s no reason to relax our own standards. But the comparison does provide some context. It illustrates that even after the stimulus, we remain within a very healthy margin of safety in our Government’s reputation for economic prudence.
None of this is to suggest that Australia should rest on its laurels. There’s a fair chance (but no more than that) that our economy will recover strongly within two years. But just as we don’t know today how far or fast interest rates should be increased then, we don’t know today precisely how fast we should be returning towards budget surplus then. So these debates need to go on and there will come a time when we need to change direction, from supporting economic growth to restraining it, perhaps with great vigour. But that time is certainly not now.
Further, as Australia’s population and infrastructure needs grow, Australians must decide whether they prefer a balance sheet more suited to genteel decline or one that supports investment, dynamism and growth. In addition to building genuinely valuable assets in R&D and carbon abatement, our education, health and transport systems and housing stock, the stimulus will, in Treasury’s words keep up to 210,000 Australians in work who would otherwise be out of jobs. Major infrastructure projects should also pass independent and transparent benefit/cost assessment.
Deploying our strong balance sheet to use otherwise idle resources – or to put it more compellingly, deserted factories and unemployed workers – to build assets that improve our lives and our economy in the future, seems much more appealing; much more commonsensical than retreating into phobias.
Fred Argy, Former Head of EPAC.
Paul Binsted, Company Director and Economist
Tony Cole, Former Secretary to the Treasury
Max Corden, Emeritus Professor, Johns Hopkins University
Owen Covick, Associate Professor, Flinders University
Steve Dowrick, Professor of Economics, ANU
Saul Eslake, Chief Economist, ANZ Bank
John Foster, Professor of Economics, University of Queensland
Bernie Fraser, Former Governor of the Reserve Bank of Australia and Secretary to the Treasury
John Freebairn, Professor of Economics, University of Melbourne
Joshua Gans, Professor of Economics, Melbourne University
Paul J. Gollan, Associate Professor, Macquarie University
Roy Green, Professor, Dean, Faculty of Business, University of Technology, Sydney
Stephen Grenville, Former Deputy Governor, Reserve Bank of Australia
Nicholas Gruen, CEO, Lateral Economics
Tony Harris, Former Auditor General of NSW
Stephen Koukoulas, Global Strategist, TD Securities
Andrew Leigh, Professor of Economics, ANU
John Quiggin, Professor and ARC Federation Fellow, University of Qld
Mike Waller, Former Chief Economist, BHP Billiton
Glenn Withers, Adjunct Professor, Australian National University
John Quiggin 
Eggheadarightisism at its worse,as above.Not that the Opposition can say much either.If any Prof. believes a compiled list like the above has an ability to withstall any attitudes developing in the community,that says,we have had enough of this lot,it will not be because of the above…it will be because “we have had enough of this lot.”
In his address to the house Ben Bernanke warns that if Govts don’t balance their books recovery will be delayed;
“Addressing the country’s fiscal problems will require a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation’s economic resources to devote to federal government programs, including entitlement programs. Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal sustainability–defined, for example, as a situation in which the ratios of government debt and interest payments to GDP are stable or declining, and tax rates are not so high as to impede economic growth–requires that spending and budget deficits be well controlled.
Clearly, the Congress and the Administration face formidable near-term challenges that must be addressed. But those near-term challenges must not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth.”
Reminds me of that fateful letter by over 300 economists criticising Margaret Thatcher’s 1981 budget that corrected the fiscally horrendous position she was placed in by Labour.
I would be very careful about writing such a letter because it reminds me of what happened in the UK where they maintained a policy of never having debt above 40% of GDP. That meant as the economy grew, so too could government debt. I agree that we need investment in key infrastructure but politics can be a messy business and it is merely a small jump to maintaining a permanently high level of debt for this “investment”.
“Deploying our strong balance sheet”- an alternative view: deploying the strong balance sheets of foreigners so we can further weaken our own balance sheet to live beyond our means, maintain political popularity, and weaken our sovereignty.
“The success of this measure can be seen in the relative strength of Australian retail sales “
Yet what of the money sloshed into banks? What of the effect of all that printing?
Now the focus on reigning in budget deficits in recession but more money than the combined wages of sin has been thrown at financial institution bailouts….. and Bernanke focuses on repairing deficits as a matter of priority?? Repair the problems in the financial markets first, that gave rise to the need for deficit budgets. Bernanke’s comments a bit like closing the gate after the horse has bolted.
“Above all, adopt clear policies and act decisively. Do too much rather than too little.”
Where you all when the madness of financial “innovation” was LEADING us to catastrophe?
As Alice said, the horse bolted with unregulated financial markets – which few if any of the establishment shills objected to.
Now they come out of their dark little academic holes to try to explain the worst budget deficit since WWII and that the sucker-taxpayers have to pay for Macquarie Bank’s (and other banks’) stuff ups.
Do these “economists” (who did not predict the catastrophe) also support the Rudd Bank, with billions of debt from the richest property developers in Australia being “guaranteed” by the taxpaying middle class – who cannot flee to tax havens overseas (unlike some of the very property developers being bailed out by Rudd Bank)? Where is the criticism over this glaring “moral hazard” (something even academics should understand)?
Give me less talk – and more gold.
ABOM – Im thinking that way myself and the Perth mint is working overtime. I am seriously nervous about inflation. I dont know if its reading too many history books but when the printing presses start rolling it seems appropriate to be nervous.
Swap your worthless pieces of toilet paper for as much gold and silver as you can lay your mits on. It’s all blowing up, and no one wants to admit the bleeding obvious – we’ve screwed ourselves in debt and the only way out is to debase the world’s currencies.
This is what the shill establishment economists are really saying: “We have no idea what’s going on, we’re flying blind, but it’s bad and it’s worth putting our children neck-high in debt to get out of this mess.”
Not only that, but it also prevented unemployment from rising just about continuously for the following five years, from 8.1% at the time of the 1981 budget to 11.3% five years later!! Oh no, hang on, umm, wait a minute….
(OECD harmonised unemployment rates data)
Just Great Gaz! – the budget is fine but the people are not!
ABOM says: “Do these “economists” (who did not predict the catastrophe) also support the Rudd Bank, with billions of debt from the richest property developers in Australia being “guaranteed” by the taxpaying middle class – who cannot flee to tax havens overseas (unlike some of the very property developers being bailed out by Rudd Bank)?”
It seems ABOM never lets facts get in the way of being politically pure. The so-called Rudd Bank has not yet been established. So pray tell ABOM how are some property developers being bailed out “by Rudd Bank”?
Presumably, to take the ABOM position to its inevitable conclusion, it would be better to see all property development stop, so that construction workers and others could be unemployed.
“As Alice said, the horse bolted with unregulated financial markets – which few if any of the establishment shills objected to.”
Umm, perhaps not, but at least one signatory of the letter did object, quite vociferously. Similarly with several other suggestions above about what economists didn’t do.
(1) Please define moral hazard. I don’t think you understand the term.
(2) Rudd Bank is/will guarantee debts of property developers. The usual response to this “support” is that it is not actual $$$s because it’s just a guarantee that may never be triggered. Yeah, well then why do they need it at all? Why don’t we all get govt guarantees on our small business loans (the UK govt has something similar in the UK for small business)? This is so clearly big end of town lobbying a TOTALLY CORRUPT Labor govt it’s not only funny you are so naive, it’s sad.
(3) It won’t matter when bond prices collapse (they are now for 10 and 30 year US Bonds) and I’m tired so I won’t bother with you any further. Enjoy your happy delusions.
Can anyone point me at these “unregulated financial markets”? I would be fascinated to see where they are. I know of very few – and those few have little, if any, effects on the mainstream financial markets.
@Andrew Reynolds
Andrew – you cant be serious? lets start with the obvious repeal of Glass Steagall?
Its been gone over so many times in here …to start arguing now there were no “unregulated financial markets” may be in one sense right …but they were suddenly less regulated than they have ever been…and it made a mess. The super statements are due in soon and as usual the ordinary man pays. It was not enough regulation over gambling banks (with too much to gamble with).
The only regulation I agree with ….is clamping down and not letting the banks lend so much (higher fraction of resrves needed) and some REAL freedom to indisviduals in how they save for retirment…instead of giving the financial markets a guaranteed secure pot (and govts a guaranteed secure pot to steal from).
You want individual freedom Andrew? And no government intervention? – give the people their super to manage themselves (in the hands of the individual to do with what they want?) or is that a little too free for you?
What say Andrew? Or might it disturb the financial empire too much??
@jquiggin
JQ I dont think I actually said that (that “few of any of the establishment shills objected to”) but I admit I did wonder it..? Can you tell me who exactly objected so vociferously? I take may hat off to them.
Alice, I think I love you…
@16 I think it was ABOM who said it, quoting Alice, which gets a bit confusing. As to which signatory of the letter criticised financial deregulation at the time, readers of this blog ought to be able to make a pretty good guess :-).
Alice,
They were hardly “less regulated than they ever have been”. Try the free banking era in Australia up to about 1892. Parts of the USA from 1830 to 1860. Scotland 1716 to 1845. There are plenty of others.
Glass-Stegall was annoying, but its repeal hardly amounted to wholesale deregulation. All it did was to break down a wall that already had huge gaping holes in it, while the US Congress merrily went on making new regulations and mandating further nonsence through other regulations.
The presence of Glass-Stegall did not stop other wholesale banking crises – the S&L collapses for one. I very much doubt it would have had any effect on this one – in fact it may have worsened it.
.
That said – I would agree with you on the super. While increased saving is A Good Thing, mandating it is, to me at least, likely to cause some real distortions. It should go. No argument from me on that – nor has there ever been.
On the wider point – the fact of government regulation is at least in part, what has been driving down reserve requirements. Why should depositors care who they deposit with and what their financial position is if the full value of the deposit is guaranteed by the government? As happened in the US the impact of the FDIC has been to drive deposits to dodgy institutions.
.
You seem to believe I am in favour of regulation when it seems to help business, Alice. I do not. It really is that simple.
If governments or people can’t pay their debts then the correct solution is default not debasement.
Sorry JQ –
I realised it had to be you after I posted my comment (doh) who was vociferous in objecting to financial de-regulation of the type that occurred under Bush’s leadership and it now appears that objections came from all sides as ABOM noted in another post (with at least one free marketer / Austrian? refusing to vote for the repeal of Glass Stegall saying “Im for de-regulation – but NOT this regulation”)…so it would seem, somehow, that vital legislation, as recognised by many economists (except lesser economists), was just overridden by the reach of power and influence. That power (over considerable resources able to be deployed towards extreme deregulation) likely emanated from within the large financial institutions themselves. An unhappy story (banks in control of policy).
ABOM – the feelings are mutual. You could me into trouble. (Good thing you are a foreign national)…and Id personally like to throttle the large financial institutions with you. How can anyone make an honest investment dollar unless you work on the inside (in which case its a dishonest investment dollar)?
I’d like to get you into trouble. I’m not as foreign as you think…
The stockmarket is full of embezzlers shorting the market and selling “your” stocks (I know them personally so please don’t put your long-term money there – it’s a gambling pit).
Residential property is normally safe – but not at these prices and these yields.
Cash is (ironically) OK because interest rates will rise in the next 12 months. Look at the 10 year US bond! It’s blood on the streets for long-term bonds, signalling higher interest rates in future.
Gold, silver and oil are all long-term positive.
I am desperate to buy a self-sufficient farm in the hinterland of Nthern NSW. Are you with me on this? Can we get an anarcho-libertarian commune started in Australia with a few like-minded survivalists?
I feel we could live together happily (Platonically of course)…
Alice,
And you failed to address any of the points I raised. More bombast?
Andrew – I can see very clearly you are in favour of no regulation (at all). Is this correct? In that case, should I declare the road to my house a private road from now on, and given there are lots of units as well as a few houses in my street, I will let the neighbours slug it out over parking, and then slug it out over blocked private drains, and then slug it out over potholes and maintenance, and I wont call the police to any fisticuffs (and there would be lots) because that would involve regulation.
Im not being bombastic but Im not wanting to address further discussion on Glass Steagall and regulation of the financial sector (we…you and I… are never destined sadly, not to agree on this one) and also because it was already covered in another debate with you and ABOM. And Andy – ABOM won that one clean, fair and hands down with a couple of knockout blows.
Alice,
More primitive straw man argument. Can you please get away from it? I am in favour of minimising regulation. The usual strawman of roads is irrelevant to a discussion about banks, yet you introduce it. I am not an anarchist.
.
I am not looking for agreement, Alice (although it would be nice) what I am looking for is actualy engagement. So far you are content to contend that there has been “financial de-regulation of the type that occurred under Bush’s leadership” and that this led to the current problems. When I point out that the financial sector is one of the, if not the, most heavily regulated area of commerce you merely try to point at Glass-Stegall’s repeal. I point out that this was one piece of legislation amongst thousands, and that was widely ignored anyway, and you come back with a bit about roads and say that there is no point arguing as we are not destined to agree. What sort of reply is that?
As for ABOM winning – that is a matter of opinion. His ignorance on the very basics of banking did not allow him to understnad the points, let alone answer them.
Andy – at least we do agree on super. Id rather have that money in my hot little hand because Id keep more of it and make more from it and have more to show for it now, with growth at a more comfortable speed than the ferrari returns (and break your neck crashes) that became so fashionable, in almost every fund, in the last decade. A casino it has been (with global super) and never before would I ever have thought I would say this but – “too much money chasing too few real investments and too many shonky investments”.
Alice,
Perhaps we could add a large tax cut into the equation? Less money forced out of your hand and spent where the government wants it to be (some wasted) and more in your hands to allow you to choose what to spend it on – like donations to your favoured charities, purchase of fair trade goods and environmentally responsible goods, increased saving for retirement. Surely having 40% or so of your spending being directed by someone else who may not share your ideals is not entirely a good thing?
“As for ABOM winning – that is a matter of opinion. His ignorance on the very basics of banking did not allow him to understnad the points, let alone answer them.”
This, from someone who did NOT predict the crisis and who is the middle of the cow pat that is the Australian financial system? Blind, blind, blind.
And as for a REAL understand of the shell game that is “banking” (a.k.a “embezzlement”) I repeat that you actually read this Austrian School piece, written in August 2003, four years before Chapter One of Armageddon began:
http://www.goldensextant.com/SavingtheSystem.html
Do you have any comment on this piece, Andie?
And for a website from someone who actually knew what he was talking about and predicted the crisis, see Panzer:
http://www.financialarmageddon.com/
Yet another writer who understand the danger of OTC derivatives and UNREGULATED financial markets, which are basically large-scale embezzlement operations, massive vaccuums sucking real wealth from the working people.
Alice, thanks for the support. I’d actually like to “get you into trouble” 🙂
“ABIM” is ABOM in disguise, trying to hide from the banking zombies, who seek to destroy anyone with either gold or a brain.
Yes, I’m drinking again, and although I might not know how to type “understanding” or “understood” in my present state of mind, at least I DO “understand” that we face a massive financial crisis fuelled by too much DEBT.
AR
You aren’t fooling anyone with your sophistry. First you say “can anyone prove…’, then Alice does so, then you pounce on one phrase to move the goalposts with some arcane reference to the 1890s. Its a childish high school debating trick. Trying to defend insufficiently regulated markets by saying that none were (completley) unregulated is creating a straw man argumetn that is no more credible than some left wing loon trying to defend communism. The regulation of financial markets internationally has been found to be insufficient, and needs strengthening. The fact that Australia, with stronger regulations, has suffered less losses, only proves the general point more. I woudl agree that some of our reporting regulations are stupid and should be abolished, but some are too weak and should be expanded, especially on private equity.
Having an ideological view that minimal regulation is preferable only makes sense if you are one of those trying to avoid being regulated. For the rest of us it is a case of however much regulation is needed to protect our investments is what should be put in place. If investment funds really cared about investors, the first thing they would do is reduce their own fees and bloated executive salaries from compulsory products like super, rather than whinge about reporting and regulation costs. I respect that you know the market better than I, but the market interest isn’t the same as the public interest.
@Andrew Reynolds
Alice,
Perhaps we could add a large tax cut into the equation?
Andy…actually thats a no – Im for a large tax increase on top income earners and when govts are bankrupted and degraded public infrastructures verging on chaos…Im sure it will happen (tax increases on the wealthy)..The very wealthy have been gambling with the proceeds of large increases from growing inequality in industrialised nations over the past thirty years (thanks precisely to excessive tax cuts granted to them) and they need to get back to the business of being responsible corporate citizens.
Its just a shame its taking major governments so long to realise the bleeding obvious. You can only push other people down (at the same time insisting on their own supernatural, but unfortunately epehemeral, wealth creating abilities) and wreck economies and financial markets and governments and workers.. with empires of highly concentrated, insider traded and hoarded monies…for only so long Andy..
Socrates,
It is not by ideology that I believe that mininmal regulation is better – but by observation. When I left Uni I had the same (IMHO naive) opinion that regulation was a good thing. Kept those nasty bankers in check.
Having actually spent 20 years (or so) trying to deal with the fact of regulation my opinion has changed.
.
As for “can anyone prove” – can you please point me at the relevant comment? I have tried to wade through them, but I cannot find it. The reason for the point to the 1890s is simple – the weight of regulation since then has been such that finding anywhere that has any experience of minimal regulation since then has been very tricky. Besides, If I cannot argue with historical perspectives it does somewhat tie my hands.
ABIM – LOL! Just dont rotate through all the vowels with those name changes…
Like this?
Did I tell you that we could have a wonderful life together, hiding from the zombie-like “let’s keep deregulating the financial system even if kills us!” Andies of the world in my “Financial Armageddon” shelter somewhere in the South Pacific.
Please heed my warning – with the quality of brain you have, you’re a prime target for the banking zombies. Please be careful, Alice!
Let’s elope from the madness!
And don’t think I’ve forgotten about you Andie. 20 years of having your mortgage and kid’s dental bills paid by the finance industry certainly has “turned” you, hasn’t it? I wonder why you turned 180 degrees?….Hmmmm….let…me….think….
And don’t think you can just avoid commenting on the prescient 2004 piece by The Prophet Robert K. Landis, entitled ironically, “Saving the System”.
I will NOT let you sneak away from being intellectually trapped so easily. Like a thief (or embezzler) in the night, you must be hog-tied down and forced to confess your sins….
Ummm – no, ABOM. I have only been paid directly by banks for about 8 years of that. 7 years was working on a prosecution of fraud in banks and the rest was in consulting partially to banks but mostly to banking clients.
You must hate it when the attempt at ad hominem argument falls flat. It means you may actually have to address the points. Naaah – you can always try to play the man again.
.
As for “Saving the System” – the system is coming back up again. Does that mean that he has turned from being right to wrong again? What about the Australian experience. Does the fact that only one (big risk taking) institution has failed (without any loss of depositors funds) mean that he was completely and utterly wrong?
No – he is right in parts. He does, however, at th eroot make the same mistakes you do. Not uncommon, but that does not make him right.
LOL Abum – should never have mentioned it – laughing so hard – the zombie banks have made bums out of all of us!!!
Andy – give up consulting and go back to working on prosecuting the banks for fraud. We need more people with your skills..!!
Tough medicine was needed. Maybe you ignored the massive structrual changes that were required… oh well I guess you would prefer the UK to have an unmanageable economy.
Andie, be careful my friend. You’re treading on landmines.
You admit you are CURRENTLY paid by the banksters and have been paid by them for 7 years. Interesting.
When I was a barrister many years ago (before leaving in disgust at the system) I saw ex-coppers come over to the other side as barristers. They did very well. Very well indeed.
Ad hominem? No, I just missed by a few years.
I have never seen a weaker analysis of the Austrian School position. “No – he is right in parts.”??? What the Hell is that all about. He is right 100%. FULL STOP.
“The system is coming back up again.” Perhaps like a zombie?
I say, “Oh, yeah? Check out 30 year notes, Andie. Or even 10 year.”
Just you wait my banking “consultant” friend. Just. You. Wait.
@SeanG
Thatcher’s legacy?
Industrial production declined rapidly under Thatcher, unemployment tripled during her premierhsip. By the end of her reign 28% of children were living below the poverty line in 1990 and it kept on rising to 30% by 1994. By 1997 the poverty rate was the highest in Europe after doubling under Thatcher. Inequality rose from 0.25 in 79 to 0.34 in 1990 showing exactly how Thatcherism failed.
Tough medicine needed? As the Brits would say… “bollocks.”
ABOM – Andy isnt alone. There are more in here employed by the finance sector..
“In here”???
I keep telling you to RUN. Why aren’t you taking my advice? They’re going to go for your brains, I’m warning you.
(At least I promise I wouldn’t do that!)
Test (sorry).
Alice,
Industrial activity fell because British industry was been heavily subsidised for years of loss-making: no changes were made because of union action and the government used to control prices so that a permanent loss was being made. GOS fell to 4% of GDP at one point and the Industry Secretary stated that this was too high.
Inequalities have risen under Thatcher and under 12 years of a Labour Gov’t – inequality is greater today than it was under the Tories.
ABUM,
Sorry to spoil your continued ad hom – but I am not currently paid by bankers. I am in fact consulting to bank clients and doing some academic work.
It’s a pity when the facts don’t fit your prejudices, hey.
Now – how about actually answering a question. Oops – I forget. Just chuck another link in.
As for “100% correct” – he has the basics wrong. A bank account is not money even though it is commonly counted as part of the money supply. The reason is clear – money is something that you can buy something with. You cannot walk into a shop and hand them your bank account. You need to withdraw funds from it first. As I said a while back:
This is your “100% correct” person quoting Rothbard – I won’t put a link in as too many links will put it into auto-moderation. The relevant para has his footnote 5 in it.
I always love it when Rothbard is quoted on money. Makes the process as easy as shooting fish in a barrel. If you ignored Rothbard and read someone who actually had a clue about banks (like Mises or Hayek) you may actually learn something.
This debate has gone through advanced stages of confirmation bias with no compromise by any participant.
Maybe ProfQ can write a post about what changes he has made to his views (economic/political/policy) since this crisis has started?
Andie,
It becomes “real” money (IN A FLASH!) the second central bankers start acting like chickens with their heads cut off as the private bankers scream “BANK RUN!!! The WORLD IS ENDING!!!” and FORCE the central bankers to print e-money on a Weimar scale (like in Q4 2008 – and right now).
To say just because M3 isn’t “real, real, REAL money” it doesn’t have an effect on the “true” money supply shows just how detached from reality you really are.
M3 is functionally today so close to money, it IS money. Especially with the electronic systems we have today where I can transfer e-money from my internet account into GOLD (real money) at the drop of a hat.
I would have agreed with you if QE hadn’t occurred in Q4. But the central bankers buckled under the pressure and now we all know no big bank will be allowed to fail. If people rush from M3 to M1 or to gold, the authorities will print as much as required. The banks will FORCE M1 higher because of PAST excessive M3 growth. This makes M3 = M1. Simple.
You are so wrong, as Q4 2008 so clearly shows.
You really worry me Andie. With people like you out there, I now see how the financial crisis came about. Ken Lewis yesterday stated that the world had not seen a financial catastrophe like the one experienced in Q4 last year for 80 years (perhaps ever). He said the modelling wasn’t working, the chaos was incredible, and the regulators were pressuring banks to do deals because of the chaos. The biggest “silent” bank run of all time.
As an outsider, you wonder: “Who are these people, and how could supposedly ‘clever’ people at the heart of our financial system stuff up so badly and have no idea themselves what is going on? If they were bridge engineers we’d all be dead!”
Now I see why. They really have no idea because they fervently believe ABSOLUTE RUBBISH (like flat earthers), despite “outsiders” screaming about the problems in front of their noses for YEARS.
How blind do you have to be NOT to think:
“Hey, I was SO wrong last year. I never saw it coming. It was like it came out of nowhere. I was blind! Perhaps Austrians such as Ron Paul, Peter Schiff, Bob Landis, Jim Sinclair, Bill Bonner and Richard Daughty (who all saw the crisis coming and accurately predicted catastrophe YEARS AGO) know more about banking than me!”
Very, very blind. Just like a zombie.
ABOM – we could have a wonderful life together RUNNING away from the zombie-like “let’s keep deregulating the financial system even if kills us!”
Trouble is, its not just the financial system they are after…its every damn system. Sean here thinks Thatcher did a good job (just because she was a Tory?) and she started the mess we are in now with her de-regulations and free market nonsense and privatisations. She tripled the Unemployment rate for goodness sake, TRIPLED it. She DOUBLED poverty. Under her reign. Sean thinks this was good thing (tough love?)?
All she did was make a mess.
Well, even her own self appointed Chancellor of the Exchequer couldnt stand her in the end and resigned prematurely because he couldnt stand her. A good man. Nigel Lawson (father of Nigella). Nice family. I knew his father. What can we say about Thatcher’s family? Dubious and includes criminal offspring.
Sean, how is the UK doing now? If Thatcher was the captain of a ship it would be called the Titanic.