learn how to navigate currency crises for a soft landing

The Royal Institute of International Affairs reply…

April 26th, 2012 | Posted by admin in Uncategorized - (Comments Off)


I do appreciate the reply but none of the points in my letter were addressed. To be expected I suppose…

I just found this pathetic article about why the UK needs to devalue by 25% to help us all…

Full Press Release

I posted the following as a comment over there. But in case it doesn’t pass moderation I’ve pasted it below. Well, it saves repeating myself…

Firstly, I can’t believe the blurb for the book says “Since the 1970s, free-market orthodoxy has dominated British monetary policy”.

You have got to be kidding me! Free market monetary policy!? Central banking, fiat currency, legal tender laws and deposit insurance are diametrically opposed to free markets. John Mills seems to think that the BofE is targeting inflation – how quaint and ridiculous. The BofE and the fractional reserve banking system are the inflation; they created and encouraged the moral hazard and the mispricing of risk that has destroyed the economy and he wants more of it…

Leaving the moral issue to one side for a brief minute, currency devaluations can only work when a handful of countries need growth. The whole world is looking for growth now – competitive devaluations are now a race to the bottom. We debase our currency so other countries do the same in an effort to steal growth from each other. The resulting currency war is a terrible result. We are a country that imports more than we export – debasing our currency will hurt us more than help us.

Now, here is the really important bit – the idea is morally repugnant. Firstly, what gives anyone the right to destroy the value of our savings via inflation and devaluation? Why are we so apathetic about the usurpation of this power. I venture it’s ignorance and that needs to change. Since we import most of the raw materials for what we manufacture what he’s actually saying is he wants wages to drop and rather than wages drop in nominal terms he wants it to happen dishonestly via inflation – thanks to what Keynes called the public’s “money illusion” – so he can more easily sell abroad for the 5 minutes it takes until our customers do the same and restore the previous equilibrium.

So here’s the thing… I could accept that policy if the UK were to drop capital gains tax on gold so I can protect my savings. I’d be 100% out of sterling faster than you can say “gold standard” and so would every saver in Britain – you know – the people who actually provide the capital for entrepreneurs. That would provide his 25% drop far more efficiently than any monetary policy could. Then when wages drop nominally at least I am in a position to negotiate with my employer without losing the purchasing power of what I’ve managed to save in my working life. No doubt lower real wages would increase employment but you know what – you could achieve that by getting rid of the minimum wage and allowing free markets to bring the supply and demand for labour into equilibrium.

What John Mills is recommending is theft – plain and simple. Inflationism isn’t new – his argument is the same tired old mantra from Keynesians and Monetarists – it’s been going on for 1000s of years in one form or another. And you know what? The government is already doing its best to steal savings via negative real interest rates or what is called “financial repression”. It’s the only way they can pay the debt without defaulting honestly so what’s his problem exactly? Are they not doing it fast enough!? Hey, why stop at 25% – if it works so well why not go further. How did it work out for the 3500 paper currencies in history that no longer exist? Argentina, Zimbabwe, Hungary, the Weimar Republic – they couldn’t export fast enough when their currency went down the toilet could they?. It’s a totally fallacious argument.

Once again, we punish the people who did the right things, and reward the people who did the wrong things. History shows that countries can have strong currencies, high wages and still be competitive – but you know what?… it requires a healthy dose of free market capitalism, and we’ve not had any of that for decades…

Either he doesn’t understand how free markets work and why fiat currency and fractional reserve banking are sucking the lifeblood out of the economy and the people who comprise it or he’s knowingly advocating theft on a national scale.

“Challenges conventional thinking” – give me a break – his is the epitome of conventional thinking. He’s an apologist for irredeemable fiduciary media and like most think tanks – they think inside the box and aim to legitimise policy with a managed debate.


US Bailout Propaganda

April 16th, 2012 | Posted by admin in Uncategorized - (Comments Off)

So the US treasury is claiming they’ll make money from the bailouts and the BBC are floating the story with no critique to ensure we all think our own bailouts were a good thing. What a ludicrous situation. I have no doubt that some money will be “made” from the bailouts but the real cost far outweighs any nominal, apparent gains.

First of all, as debts are paid currency is destroyed and the currency supply shrinks, which will eventually result in its increased purchasing power, so it sounds great on the surface. But actually , our money supply is being increased all the time – so that benefit is moot.

The key to economics is to understand what is not seen. If governments spend taxes to create jobs, it’s easy to see those jobs and give them credit for it. But what about the jobs that were destroyed or prevented from being created by redirecting resources away from the private sector? Government spending is simply organising the economy around political motives, not how the individuals who make up society would choose to spend their money. After all, if peoples’ desires were aligned with these political motives in the first place, there would be no need for government spending.

The bailouts have been a unmitigated disaster. They’ve attempted to arrest the liquidation of debt which is desperately needed, they’ve engineered a frightening massive moral hazard with implicit bailouts and perhaps, most disturbingly, they’ve mis-priced risk for market participants AGAIN… one of the major causes of the crisis. Governments and central banking got us in this mess and they are making things worse by preventing the correction. They can only delay its onset or slow down the correction and make it drag on for years. My feeling is they are setting us up for a day when interventions will no longer work, and the sudden crash will be far worse than what would have occurred had they not interfered. But what do we expect? If they hadn’t interfered we wouldn’t be in this mess in the first place. Doing nothing doesn’t sell well to the public, who for the most part have no idea what’s really going on with irredeemable paper money.

Once again, governments and their mainstream mouthpieces show how little they know about economics. There could not be a more striking example of faulty logic, enshrined in Bastiat’s broken window fallacy, than this…