There is a Reuters story in both the Times of India and the Economic Times today that says “resentment against the bailouts is growing in the USA.”
This is good news. It means that the advocates of sound money as the basis for a sound capitalism are gaining ground.
Yet, look at the lead editorial in the ToI this morning. They say, to their untutored readers:
“There are some people, such as former White House economist Nouriel Roubini, who feel that the government’s active role in rescuing Wall Street firms is turning America into a socialist state. There are others, particularly in India, who sees the crisis as proof of the inevitable failure of markets and capitalism. Both these views are wrong. There is nothing in capitalist systems that prevents the government from regulating markets. Indeed, that is the contribution of Keynesian economics, which requires the state to help maintain growth and stability in free market economies.”
How did a Keynesian get into the ToI? Huh?
Actually, under the original Keynesian Bretton Woods system, the price of gold was fixed at US$ 35 an ounce. The price of an ounce of gold is almost US$ 900 now, widely expected to rise to over US$ 1000 in the near future. Note that the US dollar now is totally free from gold. This is why there is worldwide inflation.
Keynes never asked the question: What is sound money? He called gold a “barbarous relic.” And his corrupt and insane idea of government spending paper money as a cure for an economic downturn had already unraveled itself way back in Reagan's time, when "stagflation" hit. The Keynesians thought they could "trade-off" inflation with unemployment. If inflation rose, they would reduce the money supply and accept a little unemployment. And when unemployment went too high they would pump in the money and allow a little inflation. Stagflation meant inflation and unemployment going up together. It was officially the end of Keynesianism.
Continued inflationism is the lasting legacy of Keynes. And this impacts poor people in poor countries most - as the ToI must note. The only solution is sound money based on gold: the return of the International Gold Standard. Without sound money, globalization cannot happen. Since the ToI champions globalization, it must consider deeply the question of the money that will be used in international trades.
The US bailouts will only postpone a bigger crash that is bound to occur some day in the future. This is inevitable. We all must accept the fact that we live in a "post-Keynesian" world - as Meghnad, Lord Desai, a Labour peer, put it in a book on "global governance" published more than a decade ago.
Note that the US Fed asked other developed economies to buy bad US debt and help out – but the Germans have refused. In this story from Der Spiegel (thanks to Lew Rockwell) various German think-tankers argue, and rightly so, that these bailouts are sending a wrong signal that all excessive risk takers will be protected – and that is not the “harsh discipline of the market economy."
Of course, all this shows that as the dollar dives – which it must, because more dollars are being pumped in – the US Empire weakens. There are US military bases in Germany – but still the Empire is crumbling.
Except, of course, in the ToI, with its Keynesian editors who call for and attempt to justify State interventions such as this current bailout.
Thank God for blogs – and the space they give to independent opinion.
Yes! Thank God for blogs like yours, but I get the impression that they don’t make much difference in the long run. Most of us are behind our computers dishing out “independent opinion” and probably feeling (smugly) satisfied that we have done “something” to get at the truth that the State and the mainstream media keep hiding from us. But the great majority of people don’t seem to give a shit one way or another. They read these blogs, may get angry, shrug their shoulders and go on with their lives. And in the next elections vote for exactly the same kind of moron that created the problem in the first place. Has anything changed? Will anything change?
ReplyDeletethings will only change when more and more people get concerned about the quality of the money they use. this is happening in the usa - thank God. as the crash impacts outwards, people in other countries will get interested too. this is where the role of independent opinion comes in. and the great empowerment modern technology gives to such opinion is unquestionable.
ReplyDeleteHmmm... while I agree with what you say on the topic against the bailout, I wanted to bring to your notice that your criticism of the article may not entirely be correct. The whole article itself on a reading, does not seem to put forth an opinion favouring either arguement.
ReplyDeleteEven the particular part which you have highlighted seems only to innocently contrast the two schools of thoughts - Free Market Economy vs Keynesian Economy.
Consider this from the article,
"Both these views are wrong. There is nothing in capitalist systems that prevents the government from regulating markets. Indeed, that is the contribution of Keynesian economics, which requires the state to help maintain growth and stability in free market economies.”
This can even be understood as saying that the concept of allowing regulation in free markets or 'mixed economy' is a Keynesian thought. Isn't it? I think it is poor English... 'Indeed' in place of 'In fact'! :)
^^ anand rao doesnt get it.
ReplyDeleteTOI is wrong -there is no place for govt regulations in a free market capitalistic system.
otherwise it veers towards socialism(india some years back or corporatism(like US today).
the market only needs the rule of the law -no stinkin regulatory "authority"