Value can be a frustratingly transient concept. It is documented that at the height of tulip mania in 17th century Holland, an Amsterdam town house was exchanged for a solitary bulb. Similarly, my daughter’s bedroom is often a tip and yet if she shared it with Tracey Emin, it would become art. As for those that were planning to sell their Jim’ll Fix It badge on e-bay but never quite got round to it, it’s difficult not to conclude they’ve probably missed the boat.
Common sense can also have a finite shelf life. Last autumn, Lord Turner, chairman ofthe Financial Services Authority (FSA) and until recently, a candidate for governorship of the Bank of England (B of E), commented that Quantitative Easing (QE) was now having little impact and called for more innovative and unconventional policies to kick start the economy. Considering that QE had never previously been deployed in the UK and has resulted in a total of £375bn being ‘printed’ to purchase government debt, it begged the question as to just how much more innovation he was looking for?
In a Guardian article written by Simon Jenkins, Turner offered a ‘private view’ that the UK should consider ‘monetising’ debt. That effectively means printing money in a Mugabesque manner with no pretence that the funny money will ever be recaptured, as it theoretically will via QE. Recently, he repeated this theme and called for “intellectual clarity” in economic policy including (as described by the Financial Times) breaking the taboo that permanently printing money to pay for government services is always bad. Well, it just shows how times change. When I studied ‘O’ level economics, a comment like that risked involuntary acquaintance with a flying board rubber, yet an ex Director General of the Confederation of British Industry and outgoing chairman of the FSA thinks it’s a good idea.
However, Turner’s comments are not an isolated incident. Sushil Wadhwani, a former member of the B of E monetary policy committee, previously suggested sending vouchers, valid for 3 months, to every adult in the country as a way of boosting consumer spending. Well, if that’s the aim why not send them out weekly and perhaps add some Nectar points to boot? Deputy governor, Charles Bean, has commented that British consumers should spend more and save less in order to foster economic recovery. Bean’s sagacity did not end there; older savers should not expect to live off their interest in the current climate but should be prepared to spend capital. Oddly, he had nothing to say on the course they should follow post impoverishment.
Such nonsense fully illustrates the intellectual bankruptcy of all too many academic economists and central bankers. They appear to have forgotten what real prosperity is based upon. True economic growth requires the recycling of savings into projects that make sense. Attempts to falsify final demand by mispricing money, actively discouraging thrift and printing monopoly currency will, ultimately, not pass go.
John Newsome can be contacted on: 01423 705123 or email:firstname.lastname@example.org