on 4 September 2017
Godfrey Bloom delivers an apocalyptic message on the consequences of misguided economics in an age of unreason. It carries little ‘good’ news, and its explanation of the ‘bad’ news is uncomfortably lucid. His terminology is incisively confrontational: for ‘quantitative easing’ read ‘counterfeit’. For ‘bond issuance’ simply read ‘debt’.
Bloom reminds the reader that, despite the perception that countries are protected against bankruptcy by their central bankers, government is subject to the same economic laws as businesses and members of the public. Governments dodge bankruptcy, for a time, by debasing the currency: what a single dollar could buy you in 1970, when the US was still on the gold standard, will cost you $12.50 today. He shows why profligate governments, generating mind-boggling levels of debt by money-printing, deliberately adopt policies that devalue the currency, thereby inflating their debt away.
Recent history demonstrates that banks certainly can go bust
Recent history demonstrates that banks certainly can go bust, and their bailouts simply add to the national debt, currently growing at the rate of £5,000 per second in the UK, where it now stands at the equivalent of £80,000 per family!
Most importantly, Bloom shows that state spending (in pursuit of Keynesian ‘demand stimulation’ policies) cannot rescue the economy, and never has, because consumption cannot generate wealth. The corollary of credit expansion is the inflation of asset prices, putting homes beyond the reach of young working families, while the suppression of interest rates destroys the yield on savings. He notes that any pension fund committed to meeting its pension obligations must, without an adequate yield on its investments, finish up insolvent.
Bloom’s references to the ‘end game’ are graphic: the unwinding will be played out when the towering debts must be repaid, or reneged on, and defaulting banks will not be too big to fail, but too big to rescue.
Bloom would wish to see an end to the scourge of central bankers
Bloom would wish to see an end to the scourge of central bankers; he also believes that any escape from his awesome outlook is predicated on the improbable condition that politicians are kept out of the monetary system: they do not understand what happened 10 years ago, and Bloom puts a spotlight on the errors now being repeated – in multiples.
This short book should be compulsory reading in schools as a primer on money, banking and credit. The next generation would then have a chance of learning the lessons rather than repeating the mistakes.
Despite some idiosyncratic syntax, this is an eminently readable and worthwhile recital of the most basic issues facing the economy.
AND PATRICK BARRON’S COMMENT ON MY REVIEW:
Mr. Woolf’s is an excellent review of a highly readable book. Although Mr. Bloom and Mr. Woolf both understand economic theory, they have the ability to impart their wisdom to the layman in simple terms.
Contrast this skill with our current masters-of-the-universe running our central banks, who attempt to cloak their monetary debasement in terms that they make up on the spot – and arrogantly cast anyone who disagrees with their reasons for doing so as untrained and uninformed dolts.
Their “just leave this important stuff to us” attitude, and their claims that what appears to be nonsense to the layman just shows that the layman is ignorant, simply highlights the fact that they are the latest inheritors of the American “confidence men” and “snake oil” salesmen’s pitch.
Mr. Bloom exposes this sham and warns us of its destructive endgame. How can money printing possibly lead to a better economy?
[Dr. Patrick Barron is a longtime Professor in the Graduate School of Banking at the University of Wisconsin.]