#BTColumn – Crisis of currency (Part 2)

The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

by Adrian Sobers

“Formal modeling, statistical significance, and other apparatuses of the scientific method are not the only ways of generating valid theoretical and empirical insights in the social sciences.” – (Steven Horwitz)

In Unsettled, Steven Koonin cites a 2015 speech delivered by Mark Carney, former head of the Bank of Canada who would later head the Bank of England. Mr. Carney now heads the United Nations’ Special Envoy on Climate Action and Finance. Speaking in 2015 as governor of the Bank of England, he spoke about “the insurance response to climate change”.

To support his claims, Mr. Carney cited research from Britain’s Met Office “into climate observations, projections, and impacts.”

The models all turned out to be wrong and the Met office published a  subsequent analysis which “found that the largest source of variability in UK extreme rainfalls during the winter months was the North Atlantic Oscillation mode of natural variability, not a changing climate.”

As per usual, the takeaway is not personal but philosophical. We do well to temper our use and dependence on models, especially as a policy guide. Koonin was surprised that “someone with a PhD in economics and experience with the unpredictability of financial markets and economies as a whole doesn’t show a greater respect for the perils of prediction—and more caution in depending upon models.”

But it is not that surprising when one considers economics’ glaring epistemology problem. Sir Mervyn King, Mr. Carney’s peer and predecessor, speaking to the (mis)use and abuse of economic models, put it this way in Radical Uncertainty: “All of these bogus models, as fragile as a balsa-wood structure in a wind tunnel, have a common failing.

They begin by considering how you would make a decision if you had complete and perfect knowledge of the world, now and in the future. But very few of the relevant data are known. The solution? Make them all up.”

Little wonder why the powers that be seem blind to the fact that currency, not climate, is our most pressing concern. Climate models convince them that alarmism is needed on the climate front, while economic models convince our central planners to continue aiding and abetting our political masters’ addiction to debt by expanding the money supply which leads to rising prices and a debased currency.

The only thing rising faster than the hot air from the Climate Cult is prices. According to a recent report in the Wall Street Journal, inflation in the U.S. reached a 30-year high in October. (Don’t tell that to Federal Reserve officials who caused it though.) More important for us to note is the fact that this crisis of currency is not unique to “greedy” capitalist countries.

It is telling that the title of a Lenin pamphlet now applies to our Social Democratic paradise: One Step Forward, Two Steps Back. Our Comrades whose core constituents are the “masses” and “the people”, are mum on the root cause of price increases that affect said constituents. Shameful but not surprising. In keeping with the Social Democratic theme and title of Lenin’s political pamphlets, the next question is a title he borrowed from a Russian philosopher: What Is to Be Done?

Professor Steven Horwitz answers and offers several steps forward in Monetary Evolution, Free Banking, And Economic Order. He cites Friedrich Hayek, “The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson in humility which should guard him against becoming an accomplice in men’s fatal striving to control society.”

We are, at root, dealing with bad philosophy. (Minor digression: developing competence in philosophy is, more than any STEM marketing blitz, the best foundation we can lay for the future.) Horwitz correctly observes that bad philosophy (generally) comes in the form of our outdated views of knowledge and science from the Enlightenment.

In the context of money (broadly) and monetary policy/institutions in particular, it comes in the form of orthodox Marxist central planning and general equilibrium market socialism.

Horwitz calls for a new radicalism. Not radical in the Enlightenment rationalist sense of someone sweeping away “the traditions and institutions of existing society in the name of reason”.

Radical in the sense of humility. Someone who “recognizes the limits of human reason and acknowledges the fact that all members of the human community are involved in the process of discovering truth and coming to understandings.”

As long as our political leaders lean on individuals and disciplines that adopt a rationalist approach to economic (and other) systems we will be stuck in Lenin’s loop for quite some time. It won’t matter where countries place themselves on the free market capitalism-communist spectrum. The outcome will be the same: One Step Forward, Two Steps Back. (No need to hold belly and tremble.)

And definitely don’t hold your breath for a global meeting of the minds to address the most pressing issue: currency (not climate). COVID and climate change are proving to be convenient scapegoats for the consequences of the unprecedented expansion of the money supply by our central planners. Beyond criminal, but oh so typical of Marxists.

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