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COMMENTARY
November 20, 2010
What's coming
There's a wonderful, almost Viennese remark in Jonathan Barnes' recent book on the ancient logicians (entitled: Truth, Etc.). He notes that modern logicians have little interest in history, and most think it has nothing to teach them. They have moved beyond Aristotle, and they know it. Barnes agrees, and declares that his lectures will make no new contribution to logic or philosophy; none whatever. He adds, "As for preferences, I myself rate the past way above the future. But, de gustibus."N.B. not Jonathan Barnes the author of The Somnambulist. And not Julian Barnes the author of Flaubert's Parrot. But Julian's brother, Jonathan, who taught at Oxford and the Sorbonne. And who is livelier, and more interesting. * Just after the markets closed yesterday, in China, the People's Bank (monetary equivalent to the People's Army) announced an increase in reserve requirements for China's other banks. This may sound rather boring, but really, it is not. It's the fifth time this year the People's Bank has done that, and the second time in a fortnight. Chinese banks are now required to deposit 18.5 per cent of their cash as "reserves" with the central bank; and climbing. Now, why would they be doing this? The answer is very simple: to lap up "excess liquidity." They can see what's coming; they are bracing for a worldwide inflationary storm. Meanwhile, the U.S. Federal Reserve continues to pump liquidity into the U.S. economy, by way of trying to "stimulate" it. Reader has perhaps heard of flogging a dead horse. The economy doesn't move, but the liquidity sure accumulates. Call it "Obamanomics," if you please; or call it anything, for the strategy began in panic under the Bush administration, and all President Obama has done is take a profoundly stupid idea, and run with it at 10 times the speed. There are actually two planks in the U.S. Fed strategy. The other one is: Blame China. Economic sophisticates will dismiss this capsule summary as lacking economic sophistication. Had we world enough and time, we might cite a few more numbers. But we would come to the same conclusion. Perhaps I am naive. I have long thought, "you can only sucker the people so many times." By now, after nearly a century of it, they must have learned about inflation. They should know that it is a government's way of taxing, when it can't tax any more. The value of the money in your pocket is then reduced, so the government can pay its debts in the debased currency. This is good news, too, for everyone else who owes money. The only people who get hurt are those who earned their livings honestly, or saved their money wisely. Who is to blame? You, gentle reader. You elected these idiots to power; you believed them when they promised a cornucopia of shining government programs, to pad your pensions and spread the "safety net" around. At least, it must have been you, gentle reader, because I most certainly didn't vote for them, and have opposed the Nanny State all my adult life. And what can we do about it? Nothing, until we find a way to strip governments of the ability to print money. Item: I became interested in the gold standard in high school, when I realized prices had then inflated (Centennial year, 1967) about four times over the old stable values, before the First World War. Therefore a dollar was now really a quarter; and I could use the free market bullion price of gold to recalculate everything. Then, in the later 1970s, when working as an "economic journalist" in Asia, I fell upon the works of that Austrian, Friedrich Hayek. I was fascinated by his suggestions for how to create truly hard currencies, from "baskets" of commodities including gold, that would satisfy the need for intellectual sophistication. Although really, just gold would be fine. After the raging inflation of 1979-'81, and back in Canada, I realized we were now at 20 times gold standard, and thus, I could think of the $20 bill as $1. The loonie then came along, which was worth a nickel. Time passes. There is no $30 bill, alas, so we'll have to wait for $50 to become the next convenient benchmark. (Little patience will be required.) Item: When I was a little boy, and earned money in paper, I would take it to the bank, and exchange the paper bank-notes for silver dollars. This was a routine transaction, at the CIBC on Main Street in Georgetown, Ont. -- a dollar for a dollar, no fee. And what I didn't keep in savings, I kept in a strongbox, along with my silver half-dollars, quarters, and dimes. (Really they were only 80 per cent silver, which bugged me.) As the Viennese used to say, "We look with confidence towards the past." David Warren
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