Last summer people seemed shocked when I very publicly said we'd have a crash in 2016 and would need People's Quantitative Easing. I remember Adam Boulton on Sky looking at me with something close to utter disbelief (or worse) when I said so.
Actually, I thought it would be later in the year if I'm honest.
And I take little satisfaction from being right.
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Should the government be spending more by borrowing more or doing PQE? Or both? If both, isn’t one better than the other?
If people wan to lend, take their money
If they do not, print it
Interesting historical analysis of the role of central banks in past economic crises and wars. Makes good reading, for example:
“Indeed, the Revolutionary War was largely due to the actions of the world’s first central bank, the Bank of England. Specifically, when Benjamin Franklin went to London in 1764, this is what he observed:
When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes… Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:
“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”
In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.
Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was “the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.” This, he said, was the real reason for the Revolution: “the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction.”
Full article at:
http://www.globalresearch.ca/central-banks-are-trojan-horses-looting-their-host-nations/5507301
Adam Boulton will think of a narrative to take credit for [your] PQE and reinvent it himself alongside the Govt’s introduction of ‘PQE’ as one of many emergency measures. Osborne and Cameron will blame anyone except UK and US financial systems, they will blame PIIGS, BIRC and European banks, and build in changes to Euro renegotiations measures to strengthen banking (i.e. if Deutsche Bank et al go bad). Then rescue the British savers’ nest eggs from destruction with NIRP and bail-ins etc. I even think the public sector may see forced pay reductions as an emergency measure to ‘Save Jobs’, if they can tie it into arguments for NIRP and emergency capital controls. This is a bleak dystopian view that I hope we do not encounter.
You make me feel positively cheerful this morning Tony
You chime in with Thom Hartman in his 2014 book ‘The Crash of 2016.’ he works on an 80 year cycle theory but I’ve forgotten where he counts the latest one from. If its 1945 then change is afoot, if its 1975 then we’ve got another 30 years of neo-lib burned earth before it collapses. I assume it’s the former-even I don’t think Corbyn and Sanders are a flash in the pan, especially Sanders who can actually call himself a Democratic Socialist-this hasn’t happened in the since Eugene Debs.
I think there are 35 year cycles
We still get to 2016 from 1945
I remember reading about Kondratief cycles a long time ago. These cycles are contentious though and poorly understood. They can be delayed or hastened according to a number of variables so they vary in length by considerable margins and thus offer precious little forecasting value. About as useful as long range weather forecasting but not as well understood. Not entirely useless but not something to set one’s watch by.
And what constitutes a crash? There’s been a 21-22% fall in the FTSE100 since last summer [and rather less in the broader index] but that’s nowhere near what we saw in 2008/9. Given some consolidation and tentative rises in share prices into the spring and some might argue with some good cause that it’s been a healthy correction!
Paul Mason has an interesting take on Kondratiev and the approximate 50 year cycles in his tract on post capitalism. Although it seems reasonable to observe that Mason’s observations and interpretation, particularly in respect of efficacy, are somewhat different.
I agree that the cycle can be contentious but what if they can actually be orchestrated and managed? I believe it a probability worthy of deeper investigation. The financial institutions would have us believe too many variables. I say not enough variables to be impossible.
How do you manage that sort of secular [long term] cycle? It’s ‘supposedly’ contingent in large part on technological innovation which underpins major improvements in productivity [how do you manage that?]. The financial institutions, namely the major banks and shadow financial system, can’t even manage to assess risk effectively, central bankers are clueless on monetary policy [see Abenomics today] let alone plot the rise and fall of the world economy. This stuff is up there with Bildeberg and Davos conspiracy theories in my view. You can investigate it all you like, [we already investigated for nearly a hundred years, but still!] but it’s not even established as to whether there is a cycle, let alone what’s driving it and were we to conclusively identify the cycle it could just as easily evaporate before our eyes…and take another hundred years before people realise it!
The ultimate macro question
No answer on a Friday night
Call it the Kondratiev Cycle or whatever, but when the generations who remember previous financial collapses die off, the same mistakes get repeated, ad infinitum.
It’s hardly rocket science.
Certain demographic theories seem to settle on eighty years, given as the length of time first hand experience passes through society (as Mr Shigemitsu indicates). It could possibly be called ‘Santayana Theory’ (‘Those who cannot remember the past are condemned to repeat it’). So every eighty years if we haven’t ‘learned’ our lessons (or put in place better political systems and institutions) cycles will repeat.
Recently Roy Williams and Michael Drew co-authored a book to develop Pendulum Theory – they claim we swing through 40 year cycles from extreme individualism (1980s) to extreme collectivism (1940s and again into 2020s) but a lot of their examples are cultural, and in any case their book drew heavily on *another* book called ‘Generations’ by William Strauss (and he seemed to advocate a 90 year cycle!).
Big forces must be cyclical, but the constant development of technology and a rising population mean that the dynamics must be constantly changing, and thus the timescales must change. However, I do feel the 80 year cycle has a lot to commend it. The upper limit of human ageing hasn’t changed a great deal, and the 2008 crash was almost 80 years after the 1929 crash.
So what was happening in 1936 that might be useful to look at? As I recall, that decade didn’t end well…
@Mr Shigemitsu. Maybe it is like rocket science. An observation that is initially cyclical can change depending on another key parameter eventually being critical to the stability of a system e.g. the recent discovery of gravitational waves ([1], see figure 2). The signal is clearly cyclical in the early stages of evolution and only towards ‘the end’ a sharp oscillation, then zap when ‘separation’ expires. Recovery in economic cycles may be dependent on ample resources and these are not finite. [2]
[1] https://journals.aps.org/prl/abstract/10.1103/PhysRevLett.116.061102
[2] Steve Keen’s ‘Manifesto’, the last section on the Limits to Growth http://www.debtdeflation.com/blogs/manifesto/
“I said we’d have a crash in 2016”
Me too! This is from April 2014. I even predicted the problem would start in China. So MMT can’t be too far off the mark after all!
https://petermartin2001.wordpress.com/2014/04/26/stand-by-for-the-next-uk-crash/
There’s another cycle which you haven’t mentioned – the 18 year Land Cycle. It was used by Fred Harrison to predict with great accuracy the top of the house price bubble as end 2007 in his Boom Bust, House Prices, Banking and the Depression of 2010. Also The Power in the Land of 1985. I don’t buy any of them.
Interesting talk by Richard Werner at the 2015 Rhodes Forum, where he explains the nonsense of the Washington Consensus and role of international finance in exploiting developing countries when they could have created and managed their own money supply without external debt finance.
https://www.youtube.com/watch?v=6288YPnqPhE
Another interesting short lecture by Richard Werner where he concludes that to avoid asset bubbles, boom bust cycles and financial speculation in the non-productive economy requires either:
1. “credit guidance” by central banks (i.e. preventing commercial banks using QE and debt based money creation for asset speculation)
2. state controlled money creation
3. a “not for profit” banking sector dedicated to financing the real economy
https://www.youtube.com/watch?v=eJETJSME9ro
Having a bit of a Richard Werner weekend with this documentary film Princes of the Yen. Interesting analysis of the power of central banks to act outside of democratic control and force through structural social change through credit led asset bubbles in post war Japan, east Asia, US and Europe. So the final unanswered question in my mind is who’s pulling the central bankers puppet strings and how to stop them?
https://www.youtube.com/watch?v=p5Ac7ap_MAY
Well, well, another Richard!
How VERY interesting and thank you for the link – he makes it seem so simple and obvious you think ‘Now why didn’t I see that?’
I do think that persuasion is linked to simplicity (Labour Party please note) and that far too many people think the economy is too complex for mere mortals to understand.
There is also a link below where he mentions what must be the ultimate outsourcing. The state has outsourced the money creation and allocation to the private sector!
Serco must be feeling jealous..
https://www.youtube.com/watch?v=zIkk7AfYymg
They’re getting there!
http://www.sercoasp.com/services/finance-and-accounting/
“And I take little satisfaction from being right.”
But you aren’t, at least not yet.
Well:
http://ieconomics.com/united-kingdom-industrial-production
Seems the only game in town is the funny-money game.
That and cleaning and feeding the funny-money people.
Meanwhile the Tories really do think they can get away with supporting murderous and corrupt regimes, while preventing local democratically elected organisations from acting otherwise.
This is getting beyond mild elected dictatorial behaviour to using the law to suppress all forms of opposition!
http://www.independent.co.uk/news/uk/home-news/israel-boycott-local-councils-public-bodies-and-student-unions-to-be-banned-from-shunning-israeli-a6874006.html
Teen Who Wore ‘Free Palestine’ Badge To School Questioned By Police – http://huff.to/1TivqxA
It can’t be too long before they start rounding up “dissidents”.
They may be already
Whoops… looks like another Tory porky pie is coming home to roost!
Government cuts housing investment despite soaring housing benefit bill.
“Despite Mr Cameron’s warning, housing benefit expenditure grew from £20 billion in the last year of the Labour government to £24.3 billion in 2014/15 under the Coalition.
The same analysis found that total Government housing development expenditure has fallen from £11 billion in 2009/10 to just £5 billion in 2013/14 and £6 billion in 2014/15.”
http://www.independent.co.uk/news/uk/politics/housing-benefit-cuts-investment-house-building-cuts-tories-david-cameron-a6875311.html
They keep on coming
And just around the corner……..
http://www.zerohedge.com/news/2016-02-15/what-goes-can-also-come-down
Things look interesting….
I don’t recognise the data