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by Adrian Sobers
“The victory’s found in truth / Like innocence found in youth.” – (Damian Marley, Strong Will Continue)
The resignation letters of Sajid Javid (Secretary of State for Health) and Rishi Sunak (Chancellor of the Exchequer), offered a brief glimpse at the ever elusive, bruised, and battered thing we call truth, in an area where it is most scarce: political economy. The latter part of Mr. Sunak’s letter is particularly telling and doubles as a forewarning.
Not just for Big England but Little, and countries of every conceivable size. Mr. Sunak ended, “Our country is facing immense challenges. We both want a low-tax, high-growth economy, and world class public services, but this can only be responsibly delivered if we are prepared to work hard, make sacrifices and take difficult decisions.”
“I firmly believe the public are ready to hear that truth. Our people know that if something is too good to be true then it’s not true. They need to know that whilst there is a path to a better future, it is not an easy one.” But, as I said, the letters offered only a brief glimpse of the truth, so some translation is still needed.
A translation of the above quote from Mr. Sunak’s letter would look something like this: “Fiat is all but finished. We are out of levers to pull and narratives to spin having inflated the money supply and monetized government debt like there’s no tomorrow. Well, tomorrow is soon here; I’m out.”
The title of a recent op-ed in the Wall Street Journal sums up our mess: The Fed Ignored the Money Supply, and a Recession Is Coming. Not only the Fed, but the Bank of England, the Bank of Canada, the European Central Bank, and on, and on; and on.
Nicholas Rowe (A Global Liquidity Crisis), explained the difference between printers and non-printers. Briefly, printers can borrow in their own currency that they themselves can print. Non-printers borrow in a currency that they themselves cannot print. Examples of the biggest printers are the central governments of the U.S, U.K., and Canada.
Closer to my point (and the truth), Rowe continues: “If the central bank prints at a faster rate, inflation will rise point-for-point. And inflation is a tax on holding currency, so higher inflation means that people will hold a smaller amount of currency as a percentage of GDP.” Note, this holds true in the absence of, but is accelerated by, factors like Putin, a pandemic, and petroleum. Bluntly, it is a form of stealing.
To curb said stealing, the current (and convenient) grey area concerning rules and “discretion” in monetary policy needs to be a brighter colour; preferably a colour that attracts the attention of the judiciary. Rowe ends, “Governments that try to finance too much spending by printing money eventually end up with hyperinflation and the total collapse of the currency, like Zimbabwe in 2009.”
In The Economics of the Parables, Robert Sirico discusses the oft-neglected economic implications of Jesus’s parables. When it comes to sound thinking on faith and economics it doesn’t get much better than Sirico. His insights on capital, investment, entrepreneurship, and the proper use of scarce economic resources should be read by plebeians, princes, and politicians.
His discussion on The King Going to War (Luke 14:28–33), where he explains how bubbles eventually go pop, is especially relevant to our quantitative quagmire: “Some examples of this dynamic are the onset of the Great Depression in 1929, the bursting of the dot-com bubble in the late 1990s, and the real estate bust and subsequent financial bust of 2008.”
To which we can soon add, the calamitous fallout from the unprecedented monetization of government debt. Concerning said debt, his discussion on The Two Debtors (Luke 7:37–50) is a good place to end:
“This is why government debt needs to be undertaken with serious and grave consideration, and why it is widely considered so egregious: it involves people in an obligation they never undertook.”
“The ultimate answer is that governments ought not to borrow excessively, certainly not without the consent of the governed. Like the rest of us, they should not live beyond their means.” A lot more resignations should be forthcoming since the truth about the continuing fallout from our quantitative quagmire isn’t.
Funny thing about Jesus’s teachings, the King has tendency to return. Eschatology and economics are not that odd a couple after all, who would have thought.
Adrian Sobers is a prolific letter writer and commentator on matters of social interest.
