“If you are coming off an interest rate of just 0.1pc, the effect on big debtors such as governments of a rise to say 3pc would be hugely more destructive than an increase of a similar order of magnitude back in the late Eighties and early Nineties, when rates were already in double digits.
Central banks face a brutal choice; let inflation rip or hike interest rates in a manner that provokes fiscal and economic crisis. No prizes for guessing which way they’ll go.”
And the House of Lords Economic Affairs committee will soon publish a report entitled: “Quantitative Easing – a dangerous addiction?”
How best to say this?
A decade ago, Austrian economists/commentators like Robert Murphy, Alasdair Macleod, Peter Schiff and John Rubino all warned that QE was a lifesaver for governments with big debts. A lifesaver that even with the best will in the world (hahahahaha), central banks would be unable to withdraw, and that once the political pressure kicked in they would be doubly incapable – that QE would be infinite and our economies and currencies would all drown in the excess liquidity and inflation.
They also warned that deeply-conflicted governments and their statisticians-for-hire would ensure the resulting price inflation went under-reported throughout, and yes here we are today with governments pretending not to know about the Cantillon Effect (we might call it sequesteflation) and all looking for price inflation like OJ Simpson trying on a glove….
And back then, Neo-Keynesians in the mainstream financial media laughed like hyenas, certain in assurances from “heroic” central bankers like Ben Bernanke that all would be well. QE would be eminently reversible.
Yes, the same Peter Schiff who warned us that the sub-prime crisis would create an epic meltdown, and yes the same Ben Bernanke that said “sub-prime was contained”
As a lesson in listening to the wrong voices, it takes some beating. Surely they learned from their mistake?
But no here’s Jeremy, warning us about the very effect that Austrian economists warned us of a decade ago, without even the decency to admit that they did so.
But he’s going further than that.
He is presenting this as insight instead of hindsight – that the thing he was told ten years ago would happen, and has been obviously and glaringly happening all that time, with hideous incentives in plain view, is only now even becoming a RISK?!
It’s worse even than Dwayne Robinson being told by Sgt Powell that Hans Gruber’s men are shooting at the lights, only to loudly and pompously proclaim that……. they are shooting at the lights.
At least it didn’t take Dwayne a decade to make his play.
While I don’t wish that mainstream financial journalists are about to get “butt-f***ed on national television”, I fear that they will simply pretend (as they did last time) that “no-one could possibly have seen this coming”TM, and then will continue to sell their commentary on the events receding in the rear-view mirror, as if it was gold-encrusted prophecy.
Let’s forever remember that Austrian economists spent years in the crows’ nest of our monetary Titanic, screaming that there was an iceberg right ahead, and these clueless deckhands laughed at them right up until the boat actually sank in December 2018.
I fear their laughter will be the last sound our savings and pensions hear as their value is inflated away.