VECKA 12
Tisdag
19
Mars
BT-annons
2020-06-12
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Things won’t return to normal
Att rasera saker och ge tillgångarna till politiker skapar inte en sund ekonomi.

GURU CORNER
Förbud enligt Bill Bonner:

During prohibition, violence increased. Mobsters flourished. And alcohol consumption actually went up. Booze-related deaths also went up, as the bootleggers were less careful than normal distillers.

Today’s drug prohibition is almost certainly the same story. The fix is worse than the problem.

In much of Europe and America, too… is a prohibition more far-reaching than any the world has ever seen: People are prohibited from going about their usual business.

“Lives are at stake,” say promoters of the freeze.

But do any of them know what misery they cause? How many marriages will end in divorce? How many marriages will never happen?

What will happen next is fairly predictable.

The snake oil – fake money – will give the weakened economy a heroin-like rush. GDP will go up. Stocks will go up. Consumers will spend their free money. Consumer prices will rise.

The feds will be giving people more purchasing power – by handing out pieces of paper with dead presidents on them.

They can revive spending. But they can’t revive output. That takes time. Careful consideration. Skills. And faith in the future.

The snake oil will undermine a healthy economy, not support it.

Crucial price signals will be further distorted. Time will be lost, as people hesitate… and wonder what will happen next. Skills will be blunted by inactivity.

Faith in the future? People aren’t fools. They will eschew long-term investments with uncertain payouts in favor of quick hustles… with short-term rewards.

The smart ones will front-run the feds. (More in tomorrow’s Diary.)

The dumb ones will “buy the dip,” confident that things will soon return to normal.

But things won’t return to normal.

Little more than three weeks ago, the economy seemed healthy, stable. And come the summer, said Donald J. Trump, the virus will be gone and the economy will “skyrocket.”

Not likely.

Revenues have been lost. They can’t be made up. People who haven’t gone to the dentist for fear of the virus will not go twice after the fear dissipates.

The stock market is never obvious. "It is designed to fool most of the people, most of the time." - Jesse Livermore

Fed’s assets spike to high heaven to bail out the imploded Everything Bubble it had worked so hard to inflate over the past decade.

The state has used this virus scare to demand that politicians and bureaucrats be given near-total control over every aspect of life, including virtually every business and employer in America. Will this now be a permanent feature of American life?

Even if the COVOID-19 virus turns out to be more severe than the skeptics give us reason to think it is, we can get through it. We cannot survive the end of the division of labor. It would be the finish of civilization as we know it.

Central bankers are panicking, and their solutions range from "buy everything that moves" to pushing interest rates even further into negative territory. Yet this doesn't seem to be helping much.

There is a reason to panic. But the panic should be over how governments—who know so very little about the virus that they have decided warrants destroying the global economy—will create many new threats to health and well-being through their policies.

Every crisis caused by the unbacked paper money system expands the power of the states over economic and social life, and unfortunately, once the state has expanded its power, it is unlikely the trend will be reversed.

At this point, monetary policy can't save Italy. Promises from Europe's central bank have allowed Italian policymakers to avoid coming to terms with Italy's bankrupt reality. Until now.

Between 1909 and 1913, Keynes was the most important defender of British monetary imperialism in India.

His faithful defense of the British Empire in those early years allowed him to become the century’s most influential economist after the war.

On Twitter today I saw someone claiming that "World War II got us out of the Great Depression," the implication being that trillions of dollars in government spending and "stimulus" today can be only a good thing.

Even some conservatives think World War II cured the Depression.

Oh, people.

Destroying things and diverting resources into the hands of politicians do not, in fact, create a healthy economy.

What needs to be done in such a crisis is not to attempt to steer the market to ensure it provides what is needed, but to let it free to do what it always does: match the goals of entrepreneurial producers with the needs of the populace.

 
Göran Högberg

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