Deflation, as demon, is a myth. At the very worst, it is a natural but potentially very painful bursting of a bubble, itself a metaphor for that desperately dangerous illusion that is fake growth. But the real danger is inflation, as this truly great economist reminds us.
I wonder if Brown, the man who really has put Britain on the road to serfdom after that terrible decade of his Chancellorship, which saw him deliberately overheat the economy, itself enabled by his precipitate deregulation of the banking industry, while he also indulged in politically motivated deficit-spending, has ever even bothered to read him. I very much doubt it. And if he has, it's clear Brown had no interest in comprehending him, even if he could.
It's certainly the case that St John of Deficit (Keynes), darling of the Left but totally misunderstood by them, would agree with Hayek, not Brown, on how to deal with the current slump which Brown, an economic illiterate, helped enormously to create. Printing money, route one to the creation of an inflationary timebomb, is not the answer. Facing reality and cutting back intelligently is.
I hate to think what Hayek himself would have to say about Brown's current, suicidal expansionism. It would be polite, but it would not be kind!
Cracking post Mr D. Dunno how things stand right now but Guido ran a story a while ago about the BoE pension fund being hedged against inflation at the same time as they publicly raised the (empty) spectre of deflation - deflation, ffs - worth a giggle I suppose =)
ReplyDeleteCould the BoE pension fund managers not have handled the public, i.e. our, finances with the same prescience? Silly question, really. As is the (very closely related) question of who knew what and when.
You are so right Holey, in every way. But I wonder if even the all-seeing Guido has comprehended the sheer scale of the damage mindless neo-Keynesianism, and Brown's abject abuses of even that illigitimate child of Keynes, has done to this country.
ReplyDeleteIt's chilling but true that your key question "who knew what and when" can't be answered by any member of this generation, worldwide, (and I mean no one - especially senior economists - most of whom are contaminated by their poltical proclivities when it seemed like a neat idea).
And that explains why it all went so wrong.
It will be for future historians, who will have the happy accident that is the objective distance of decades, to judge who was to blame for this disaster.
One thing is certain, they won't be kind to Brown!