"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense.. that gold and economic freedom are inseparable."
- Alan Greenspan, unbelievably.
Philipp Bagus, on the consistently excellent Mises website, asks whether we have now crossed the point of no return. As Austrian economic theory essentially warned, a credit expansion led by a largely unchecked banking system triggered an unsustainable boom with all the attendant malinvestments. The problem, however, is not that the free market has been allowed to run out of control. Quite the contrary. Under a free market system, unsustainable financial organisations would have been liquidated. Instead, as Bagus explains, governments across the world chose to inject capital into the banks whilst guaranteeing their liabilities: “malinvestments induced by the inflationary banking system found an ultimate sponsor – the government – in the form of ballooning public debts”. If the level of public debts before the crisis had been modest, the cost of the banking system bailouts might have been manageable. But since the level of public debts was itself at crisis levels pre-crisis, it may now be beyond the point of salvageable return. The example of Greece is hardly reassuring. Bagus suggests that the ultimate outcome of our present dilemma is the inevitable collapse of the welfare state. But whatever the outcome, the tone of the public debate requires that electorates recognise that politicians are not and cannot be the solution, because they are unequivocally the source of the problem.
The also excellent Zero Hedge blog recently carried a damning polemic entitled “The Selling Out of Germany” which makes largely the same points, albeit in some more richly spiced language. Since most of the mainstream media remain unaware of or unable to satisfactorily report the issues, we make no apology for quoting liberally from it here:
“I feel very bad for the German people. Not only do I feel bad for them but I can empathize. I too am being forced to sit back and watch this comedy of errors as a corrupt, inept and increasingly dangerous class of elitist political and financial oligarchs destroys my nation.”
A former client asks what the writer thinks of the Euro zone bailout. His response:
“Basically, it’s a total joke as is everything else the politicians have done. No one and nothing…
