Thursday, Dec 18, 2008
Hitting the mainstream
Telegraph: Free money coming your way!
The financial crisis is so bad that governments are ready to print money to stop the economy seizing up.
Not only did the Fed cut interest rates to as low as zero, it indicated that it would hold them there and that it will pull out the big guns – in other words ready the printing presses – to fight the worsening crisis. A day later the Bank of England minutes revealed the committee had considered cutting by more than one per cent this month.
The Western world is now in recession, at a scale few of us have experienced. Even so, the fact that Bernanke and the Fed are advocating helicopter drops of cash is startling. This has alarming precedents: it was the printing presses that did for Weimar Germany, and sparked Zimbabwean hyperinflation.
24 Comments
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1. drewster said...
The Telegraph have had a brilliant economics / business team since before the start of the credit crunch. The combined intelligence of Ambrose Evans-Pritchard, Edmund Conway, Roger Bootle, etc. puts the other newspapers to shame. David 'noshbag' Smith of the Times looks like a primary school student by comparison.
Even the Express understands deflation:
2. little professor said...
Ah, but inflation is so wonderful - look at this propaganda piece from the 1930s:
3. bellwether said...
The constant references to Zimbabwe and indeed the weimar republic are wearing thin, as if just to mention them explains much or indeed anything. There are no parallels with the global situation and a lunatic state like Zimbabwe and few with the WR who were inflating there way out of the armistice settlement in an isolated manner. I know we really don't want house prices to go up again, but a bit of rigour.
4. drewster said...
Quite a good film! Worth watching if you have ten minutes to spare. It explains deflation and the depression very neatly. Heavy propaganda though.
5. drewster said...
bellwether - I agree, Zimbabwe and Weimar Germany are very exceptional cases. However the US Great Depression and Japan's Lost Decade are not exceptional at all.
6. growler said...
as bellwether and drewster say, 1924-1926 Germany has nothing to do with now. But I also don't think we should worry about a sudden boom appearing from nowhere in house prices. The fundamental issue is banks giving credit. The banks - who might be aware that printing money might end up inflationary - will seek to secure themselves. Already Abbey is calculating mortgagors ability to pay based on a 7% interest rate - even though present rates are lower. Their aim is to recapitalise, the governments to get them to lend to BUSINESS as this creates jobs. It's in noones interests that the printing money policy ends up creating another HP boom. I can see banks getting pressure/support to lend to business, but not for individuals for silly house loans. So I expect the money printing to stop by June and if we're lucky, inflation will not be over 8%-10% as a result.
7. cornishman said...
The film shows how printing money causes inflation - but it's important to realise that this only happens within a closed economy.
Given our global economy and the internet it is easy for people nowadays to swap their devaluing currency for another currency which is seen as less of a risk. So, instead of the money printing going into increasing prices in the country adopting the process, the currency devalues quicker as more and more people jump ship - and so the economy dives even more. I believe a lot of Japan's recent money printing went overseas and did not help Japan much.
Brown's call for a co-ordinated global response today can be seen to make sense in this respect.
(can't believe I just wrote that something Brown said made sense...)
8. mountain goat said...
The best way of getting money circulating in the economy is to give it to gold bugs. They wont hoard it, unlike banks and everyone else in this climate of fear. Gold bugs will spend their air-dropped money and buy gold with it.
9. last_days_of_disco said...
@mpuntain goat
Hahahah, I love that idea.
10. Rentinginthesouth said...
drewster, stop showing the daily express - it's burning my eyes :)
11. shipbuilder said...
The worrying thing is the speed at which these methods are being considered. Is one or two months really enough to start seeing if low interest rates are having an effect, before they start on the next big scheme? This looks like blind panic.
12. paul said...
I see a big problem with this free money strategy.
Sprinkling money from helicopters like confetti will not necessarily get people spending it - it would have to be some form of coupon.
It really is Zimbabwean economics though - the idea that you can magically solve economic problems by printing money.
Deflation is going to happen anyway too - it's built in already I think.
13. str 2007 said...
What worries me is that average Joe who's in debt and quite happy to put his head in the sand while someone else fixes everything, will be quite happy to do so.
A lesson needs to be learnt by the man on the street and I'm afraid he's not learning the lesson.
Essentially I think a bigger mess is being created - at the expense of the prudent.
14. paul said...
"Essentially I think a bigger mess is being created - at the expense of the prudent."
A bigger mess is certainly being created, but I don't think the government can pass money round only to people with mortgages, or only to people without net savings.
15. andrew said...
So it is okay to print money but not okay to cut taxes ?
16. crunchy said...
I can't understand why we think that punishing the prudent is so bad.
The prudent do not fit into the business model.
Snap out of it. Fairness has no place in a ruthless system.
17. Hermitage said...
If governments can print money, why can't they create employment instead? Surely it would be far preferable for people to be treated with worth rather than throw some worth at a selected group.
18. crunchy said...
Your Mama does not run the world.
It is dog eat dog now and always has been.
19. paul said...
crunchy, the appearance of fairness is crucial to keep the rabble docile.
We couldn't have the worker bees turning on the non-productive drones as happens in the animal kingdom when there are shortages now could we?
20. shipbuilder said...
17. crunchy said...
"It is dog eat dog now and always has been."
Have you ever asked why, or do you agree that it should be?
21. crunchy said...
18. paul, I underestimated you. lol.... Speaking of Bees where are they. Worth some searching.
19. shipbuilder. Greed is built into humans.
When that greed is promoted to a level that should never be, you have to ask yourself why.
The monkey that fills his hand with food will never get it out of the jar, even when the huntsmans gun is aiming right at it.
Dont agree.
22. crunchy said...
18. paul said...
crunchy, the appearance of fairness is crucial to keep the rabble docile.
We couldn't have the worker bees turning on the non-productive drones as happens in the animal kingdom when there are shortages now could we?
crunchy.... That Paul is why the masses are being looked after. No more complaining. It is what it is. For now.
23. shipbuilder said...
Crunchy,
Actually humans are hard-wired for altruism. The 'greed is human' angle is a myth, promoted by the psychopathic who quickly rise to the top of the tree and promote their view of the world, including the economic system that meets their needs. Does this sound like a conspiracy? No, sociopaths and people with similar disorders cannot and do not work together in the way required by the theorists. Common goals are not the same as organisation.
24. crunchy said...
23. shipbuilde
Exactly.
The greed is promoted through the propaganda machine, You need more to survive a shortage or you need more otherwise your fellow man will take it and rub it in your face.
This nurtured greed is the ultimate tool in advancing the power structure. It is also a great divide and rule technique. Problem is it bloody works.
The clever bit is that they always take the fruit away in the end and place it back neatly into their own hands. Most unsuspecting Pawns remain totally oblivious to this.
It is quite normal that a few twig on, but not enough to put a halt the the con. The people that have twigged, find that life becomes somewhat different. A strange kind of freedom
that they are not able to share because that has also been taken care of. These fruit bribers employ the best. The very best mind controllers that money can buy.
Hell they can afford it. They own the POISONOUS TREES.