Thatcher had Alan Walters. Blair had Derek Scott. It seems that Gordon Brown is turning to Robert Mugabe for economic inspiration.
News reports today suggest the Government is looking at printing money to stimulate the economy. This is policy that brought economic havoc to Zimbabwe and is generally the last ditch throw of the dice by military dictators trying to shore up their power at times of economic collapse.
General Juan Domingo Peron, another supporter of the printing money school of economic management and the man who oversaw Argentina’s spectacular post war decline, is reported to have marvelled “there is so much gold” as we was taken around the country’s Central Bank. Brown’s trumped that - he’s flogged off Britain’s reserves (although there is no evidence to suggest he’s raided the vaults for personal gain like many of his new found economic heroes).
Here’s a prediction. By the time of the 2012 Olympics, UK inflation levels will be in double digits. But unlike Mugabe, the man to blame will have been long gone.
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Why did it take the Labor party this long to express their inner genius: All we have to do to "stimulate" the economy is to make all the savers poorer by printing more money, after all it worked out just great for the Weimar Republic, right?
This is all true, but to be honest it’s been thus for a long time. Actually “printing” money is of secondary importance. The total supply of money includes both notes and deposits in bank accounts (which can be used for payments with, for example, a debit card, as though they were cash). And, as I demonstrated last month, this has been expanding at a terrifying rate since about 2003. This has inevitably fed through (after the usual delay) to consumer price inflation and then to a rapid deflation as people begin to panic and lose faith in the banks.
We’ve seen it all before, but governments never learn. We should adopt a policy of stable money, but no politician has the courage to admit that our long-term prosperity would require a short term period of painful transition. This is a shame, because that is what we are experiencing now.
Instead, all three parties want to alleviate the current pain at the expense of another bout of inflation and subsequent depression a few years down the line.
A return to boom and bust?
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