Good Friday
In Australia, the government is pouring hundreds of billions of Au$s into the economy. This will not solve the problem of business – that being a complete breakdown in marketplace trust. How can anyone trust either a producer, a supplier or a consumer when businesses can be shut down on 36hrs notice by a legislative whim and when people can be ordered not to go outside?
Marketplace trust is what provides traders with the confidence to predict. It is successful predictions that spin the wheels of an economy. The better that business is able to predict, the stronger the economy. The reverse is also true.
Pouring easy credit into an economy that lacks the ability to predict is not going to help. Lacking confidence, no amount of easy credit can create an environment conducive to trade.
But then, that is not its objective. The easy credit is being used to fund increased government expenditure in the attempt to keep unemployment down. They are saddling taxpayers with even more debt in order to save their own faces. What helps government does not help business.
As said in an earlier piece: the economy is the business momentum built up over generations. It is a wealth-creation exercise supported by a foundation of the necessary confidence to employ capital and effort in order to take advantage of predictions.
The world’s economies have suffered massive disruptions before. The Black Death killed 30% – 60%* of the population of Europe, WW1 and WW2 caused immense disruptions, but even the atomic bombing of Nagasaki and Hiroshima didn’t shut down the whole of Japan’s economy.
At any given moment, the economy is a complex aggregate of highly fluid commercial activity. It is not a stasis that can be turned On or Off at the flick of a government switch. Not once in the history of Western Civilization has any national government been psychotic enough to utterly, forcefully and deliberately sever the links of its own complex aggregation of business activity.
At the moment, to put it mildly, business lacks confidence. That does not mean that predictions cease; it means they begin to head in the direction of ‘what else can go wrong?’, and ‘what are the ramifications of all this?’, rather than ‘how and where can we increase, decrease or modify production in order to make money?’. It seems likely that we are tentatively approaching the point when businesses begin to question the validity of the money itself. A major economy has not even been close to that since 1923. When the whole of the West goes down that path, then watch out below.
It follows that governments will begin having to bypass their bond markets. Soon after that, the whole fanciful charade, all that is left of their economies will implode. Oh, by the way, the debt and the debt notes that are currently used instead of money will also collapse.
The old Chinese curse ‘may you live in exciting times’ does not even begin to touch on the scope and scale of this self-inflicted disaster.
* Wikipedia
PS – just read the news. That didn’t take long.