Yesterday morning I posted, on my personal blog, some anodyne remarks about how economic trouble strikes. They included this:
Speaking of Paul Marks, …
… as I was …
… someone should really dig out him ranting away three or four years ago about the fact that the British economy is doomed, doomed. Now everybody is talking like this. They are merely telling us so, now. He told us so, years ago. With luck, it will be possible to find an entire Samizdata posting, from way back, in which this last week’s cursings are all there.
I scratched about for a while in the Samizdata back catalog, but could find nothing entirely suitable. I suspect that Paul may have posted a lot of his best doom-mongering in comments, both following up on his own postings, and on the postings of others. However, commenting at my posting this morning, Peter Briffa supplied a link to this posting at conservativehome.com, dated June 14th 2005. The posting itself concerns some fairly anodyne remarks from Shadow Chancellor George Osborne, about such things as a “modern, integrated transport infrastructure”, a reduction of the regulatory burden, a “strong macroeconomic environment” and “simplification of taxes”. But then, comment number two, quite long, turns out to be from a certain Paul Marks. It includes this:
On the Bank of England: Well the British money supply is expanding at least as fast as the Euro money supply (see the back pages of the “Economist” any week for the stats) – so even I would not make a jingoistic claim that all things in Britain are fine. Of course joining the Euro would mean even lower interest rates for central bank credit-money (hardly a good idea).
Sadly the notion that “expanding the money supply” is good for long term economic prosperity has been an article of faith for many decades (whenever there are problems the cry goes up “cut interest rates”). Once it was believed that this credit money expansion should be linked to the general “price level” (in order to prevent, horrors of horrors, falling prices), but at least since Keynes the doctrine has been to issue more money (by various clever means)as soon as there is trouble – whether the “price level” is going up, down or sideways.
I do not expect to convince anyone here that credit money expansion is the cause of the “boom-bust cycle”, but for anyone who thinks (along with Mr Blair and Mr Brown) that this cycle has been “abolished” I would advise them to watch and see.
So, not only did Paul Marks predict the trouble ahead that we have now crashed into. He also predicted what would be wrongly said about how to deal with it when trouble did in due course strike. I’m sure that there is similar stuff to be found here. Paul? Anyone?
There must be somewhere. Reading an article without reading Paul Marks’ comments is like eating meat without cooking it first, i.e. you read Paul’s comments first, then you read the article and it’s so much easier to digest.
I remember reading Paul’s comments and I’m fairly sure they were in the comment section, although I seem to recall it was to one of his own posts.
The difficulty is not whether one can see the doom coming. Economic cycles are nothing new, so one will be right eventually.
It is being capable of guessing the timing, and the extent of the crash. It is all very well to be right “in the end”, but it will have cost you a lot in the meantime in lost opportunities or going against the market.
When we had the internet bubble, a trader friend of mine was saying it was crazy a long time before the crash. But he also pointed out that whether he was right or not did not matter, because it still cost him a fortune, even if he was right eventually !
Pascal
I agree about the timing thing, but I think you miss the point rather. Which is that a lot of people, including and especially those who caused it, never saw any crash coming at all. Our current PM said again and again that such crashes were now a thing of the past.
We know that these people (PM, MP, whatever) aren’t very bright, don’t we ? So, what’s new ?
About two years ago I advised a friend to get out of the market, as it was bound to crash. Well, it crashed at last, but is still higher than 2 years ago…
Brian,
Most of the people you think of had a vested interest in the market carrying on (new paradigm, this time its different, etc ad nauseam…), and the problem is to go along but quit just before the last fool !
I also have never believed a word Brown (or any politicians for that matter) said, and if people went in because they believed him, then they deserve everything they lose and more ! I am heartless like that.
I was advised to invest in commercial properties 3 or 4 years ago, and it did not make sense to me at the time for reasons that have been proved right eventually. I would probably have done well by now however.
From The Telegraph today-
“We’re going to print more money”.
…you read Paul’s comments first, then you read the article and it’s so much easier to digest
Mike –
Quite so. Paul is one of a handful of Samizdata commenters* whose comments I seek out first.
There are three persons whom I count as having the greatest influence in the way I understand the world. Paul is one of them.
* the list includes, apart from Paul, also Nick M, Jonathan Pierce, Sunfish, and, increasingly, Ian B. Over the several years I’ve been lurking around Samizdata I’ve come to regard them as the good guys, to whom I owe much.
My apologies to Jonathan for the mis-spelling. I blame it on this rather nice bottle of German white…
What nice things people are saying about me.
Although some of the credit money expansion in the United States was hidden (a point made by Ron Paul, but not by me). And the Euro credit money expansion has yet to burst.
Almost needless to say (no NOT, sadly, almost needless to say) the reaction to a credit money bubble bursting does far more harm than the bust itself.
The proposals of both Senator Clinton and Senator Obama would turn a 1921 (or 1981) style economic decline into something like the Great Depression.
And they are calling the other candidate Herbert Hoover – perhaps because hardly anyone remembers that he was Herbert “The Forgotten Progressive” Hoover.
On this at least libertarians of all factions can agree – the one thing the government must not do is to try and prevent wages and prices adjusting to a bust.
Ian B nails it. The BBC had a remarkably uncritical news report on the government’s plans last night. They should have just come out and said they are going to increase the printing of money and have done with it.
I note how Alan Greenspan has sought to play down the role of central banks in this current mess; as I said a few days ago, sure, with globalised international capital markets, the price of borrowing money is global, not national. Japanese interest rates are so low that many financial players borrow in Japan (0.5%) and switch this cheap cash to other parts of the world.
There was in interview a ways back with Greenspan and one of the guys from the Fox Business channel and he basically got Greenspan to admit that a central bank is not necessary to the development of trade and prosperity.
I can’t find the youtube video right now. Perhaps one of the other contributors could dig around and find it.
http://www.youtube.com/watch?v=ZjMQG3qUFKo
2005, eh? Damn, he beat me. last May I predicted recession on my blog, just before the US sub-prime mortgage stuff, based on increases in the money supply, massive increases in personal debt and plummetting savings.
Alan ******* Greenspan. Ayn Rand should not just have put her plate in his face – she should have broken the table over his head.
“That would have been a violation of the nonaggression principle Paul” – O.K. fair enough.
Banking is noble work when it is about investing the savings of people in productive things.
It is not noble work when it is about taking credit money expansion (not real savings) and “investing” them in stuff that does not produce anything – and then whineing for yet more subsidies when the whole thing goes wrong (yet again).
Money may not be barren in the sense that Aristotle and Saint Thomas thought it was (i.e. there is nothing wrong with lending money for interest) – but it is barren in the sense that just manipulating credit can not produce long term real wealth.
This can only be produced by investing real savings (i..e. income that people do NOT have to spend – money they have chosen to give up in the HOPE of getting more later when and if they are paid back) in enterprises to produce things.
In short finance is a means to an end – not an end in its self. And a large country can no more be “based on financial services” than a house can be “based on its roof”.
“But if there is a credit money expansion pushed by government and you do NOT seek to use it your financial enterprise gets disadvantaged compared to the others Paul”.
Yes I know – the bankers (and so on) are trapped. If they try and act with sense (not invest in bubbles) people scream that their earnings have fallen behind the competition – and they lose their jobs.
And they can not say “but the competition are going to go bust” – because people do not look that far ahead, or the government will bail out the competition, or the competition may manage to sell off the dodgy “investments” before the market crashes (thus preserving their gains).
Meanwhile the person who says “this is all mad, I will not take part” has been sacked and is on the bread line.
So it is rational for people in the markets to act as they do – rational because of the various government interventions.