#BTColumn –Heist of the Century (Part 1)

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“The world has changed. The intellectual frameworks have evolved. We don’t need to worry about debt.” – Paul Sheard, Research Fellow, Harvard Kennedy School.

In his book on the development of Thorstein Veblen’s economic ideas, Charles Camic referenced a poem about the productive and the parasite from Veblen’s childhood: “To fit up a village with tackle for tillage Jack Carter he took to the saw, To pluck and to pillage, the same little village Tim Gordon he took to the law.” Jack Carter says Camic, “is concerned for his village, and, like him, the self-made men of the books labour in the service of family, church, community, and nation.”

With global government debt now at its highest level since World War II, that poem could be rewritten: “To fit up a village with tackle for tillage Jack Carter he took to the saw, To pluck and to pillage, the same little village Tim Gordon artificially suppressed interest rates and developed an addiction to quantitative easing eroding the villagers’ purchasing power.”

While it doesn’t have quite the same ring as the original, it describes the debt trap being set by parasites.

This sentence from a report in the Wall Street Journal sums up the US situation: “Like flat-screen TVs, the more inexpensive government debt becomes, the bigger it gets.”

This is neither unique nor specific to the US, as the authors of Governments World-Wide Gorge on Record Debt note, “From Rome to Tokyo to Washington, governments have decided to seize the opportunity and spend their way out of the COVID-19 slump.”

The Journal report cited one of the authors of an important book, The Great Demographic Reversal (TGDR), and our regional leaders (continue to) ignore its premise at our peril since it especially applies to us: “After the end of the Cold War, the integration of China and the former Soviet bloc into the capitalist global economy brought a vast and growing labour supply.” This had the effect of suppressing wages and inflation in developed countries.

However, as the book’s title suggests, this trend is set for a reversal: “as aging populations in China and other nations spend more of their savings, average interest rates will rise higher than governments have bargained for. China’s greatest contribution to global growth is now past and this great demographic reversal will lead to a return of inflation.”

The authors’ analysis is spot on and we are starting to see why as our purchasing power erodes faster than the Phoenix Suns’ 2-0 NBA Finals lead. To believe the narrative peddled by Federal Reserve Chairman Jerome Powell about “transitory” inflation is to, as St. Paul put it, “of all people most to be pitied.”

I suspect readers can identify with (and expand) the list in the lament of one commenter: “Inflation is in check, but my cereal box no longer can stay upright with support because the width of the box has been diminished so much. Inflation is in check, but my half gallon of ice cream angular brick has been morphed into an ever shrinking oval.” He ends, “We are witnessing the ‘crack-up boom’ von Mises warned us about.

Keynes gave license. MMT [Modern Monetary Theory] greases the skids. Then it all comes down hard.”

He is one hundred percent right and it is only a matter of when (not if) it all comes down hard. But, much like the Second Coming, only the Father knows the exact time.

However, you can safely bet the family jewels that when this intellectual and moral fraud comes down hard, we will be treated to a public lecture series by the usual suspects in the Politburo about the failure of capitalism. Truth be told, the root cause is actually closer to their ideology with its penchant for central planning.

Rather than blaming “greedy” business owners and capitalism we would be better served by diverting this scrutiny to parasites like the Federal Reserve and the European Central Bank (heaven knows this never applies to our region).

They monetise government debt so that politicians (independence, schm-indepence) can keep their platform promises knowing that the blame from the economic fallout from their overworked printing presses will probably be shifted to the emotionally satisfying poster-child: “greed”.

Writing for The New Criterion, John Gordon (The Cost of Words) gives a wonderful account of the history and economics of the written word.

He ends, “As the price of words has fallen over the last six thousand years, the power of words has only increased, which is why tyrants fear them more than bullets.” In this context, the power of another printing press is having the opposite effect on consumer prices.

Adam Smith’s conclusion that prosperity follows countries whose governments limit their activities to the protection of three Ps: person, property, and promise (contracts) is still true.
The current heist we are witnessing, relies on the opposite; expansive government and the priming of printing presses which has the effect of literally sucking the purchasing power from people’s pockets, you know, like a parasite.

Adrian Sobers is a prolific letter writer and commentator on social issues. This column was offered as a Letter to the Editor.