Fiscal? No. Monetary? No. What next?
I did economics in college. My tutor was at great pains to point out to his class that economics is not a science and two plus two does not always add up the way one might think.
The world has allegedly recovered, we are told, from the great crash of 2007 and 2008. I don’t really think so. What I really think is that governments, central banks and financial institutions bent over backwards using everything, anything so the sky didn’t fall in. The sky still hasn’t fallen in but I reckon we’re not out of the woods by a long chalk. As I write this column G20 nations are meeting in China. I’m not even going to speculate how much that costs. Deals will be made, some in the public eye, many probably not. Enemies will pretend to be friends or at least neutral then they will all scamper back to their respective countries and carry on carrying on.
The global economy just doesn’t want to grow or at least at the pace that the bean counters want or need it to in order to grow the economy out of trouble. We’ve had interest rates cut to the bone, unless you want a pay day loan or have credit card debt that is, quantitative easing (printing money) and helicopter money (dumping money from the sky to people who will spend it).
Looking at them all in the cold, hard light of day all of those polices look, frankly ridiculous. The latest trend in, to me, economic crazy is negative interest rates. In essence I could pay money into my bank account for safety and for the bank to use to lend to other people and make interest from and the bank charges me for the privilege. What kind of deal is that? Doesn’t look like a good one to me.
I’ve already noted that some banks are adjusting terms and conditions for the fateful day. I really don’t think that’s going to work as an economic policy. Mainly I think because, like many policies before it, it rules out the effect on human emotions, attitudes and then behaviour. If my bank is going to charge me for keeping my money, I’m A: Going to find another bank that doesn’t. B: Pay down all my debt faster because it’s cheaper to do so
than lose money on deposits, including pensions, and most likely C, D, E and more when I think of them. The upshot is that the effect of negative interest rates will not have the desired effect.
One of the key phrases that was drummed into me when I was at school and college was, “Laissez-faire,” in economic speak, governments and central banks back off and let the
market sort it out. In terms of the crash of 2007 and 2008 this may have amounted to, “break it up an start again.” A great cull if you will or pretty much anything financial, government and maybe a good deal more.
In hindsight would this have been a bad thing for where we are today? I still think folks that the crash of 2007 and 2008 was at a great deal of cost, just put off for another day, and it
might have been better or easier to take medicine eight years ago rather than look forward to a bigger dose in the near or medium future.
I also read an article recently purporting the theory with the backing of some scientists that we could all be living in some kind of Matrix like simulation in which case all this crap we fixate about may not amount to a hill of beans.