World Leaders Meet, Pretend to Have a Clue
The latest such exhibition took place in Washington, D.C., on Friday and Saturday, when the leaders of the G-20 nations met to give the appearance that they are, as AP reporter Jennifer Loven reports , “battling a dire and deepening economic crisis.” Fortunately for everybody, these clown princes failed to reach agreement on any Grand Plan to Save the World. Such plans invariably make matters worse. Let us pray for gridlock.
The leaders did utter brave words, however, as they are wont to do on such occasions. “There shall be no blind spots,” declared German Chancellor Angela Merkel. “There is here a great common will to ensure that such a crisis is not repeated.”
One might have thought that the first step in precluding a repetition of the crisis would be a clear recognition of how it arose. This, however, is the last thing we can expect from our glorious leaders. As Loven reports, those assembled for the meeting were “uncharacteristically determined to hold their tongues,” and “talk of blame was kept to a minimum,” as well it should have been, lest someone so much as suggest that government policies themselves might lie at the root of the present debacle.
Many members of the group adhered instead to the privately expressed idea that “the primary fault for the cascade of ruinous events lies with a U.S., where it has become the norm to offer easy credit, outsize rewards for high-risk investing, and lax oversight to the whole process.” Very good indeed that no one spoke aloud about the “easy credit,” because doing so would lead too directly to a recognition that the Fed and other government agencies made such credit conditons both possible and, in certain areas, such as subprime mortgage loans, virtually mandatory.
President George W. Bush, the lame duck du jour, did reveal to the group that “he had agreed to the recent $700 billion rescue plan for U.S. financial institutions only after being told the nation was at risk of falling into ‘a depression greater than the Great Depression.’” It would be interesting to know who told him about this risk, but security concerns no doubt prevent the president from revealing the sources and methods of his intelligence gathering. (I am picturing a captive economist, standing on a cartridge box, wearing a hood over his head, with electrical wires attached to his genitals.)
It would have been a godsend if the president’s economic adviser had alerted him to the fact that the original Great Depression occurred not because the market system suddently went horribly awry, but because a relentless series of counterproductive government polices transformed what would probably have been a brief recession into an unprecedented economic catastrophe–in the words of economists Thomas Hall and David Ferguson, government officials made “an incredible sequence of policy errors that generated a cataclysmic event reaching around the globe.” Hall and Ferguson’s account of these policy errors does not agree in every detail with other economists’ accounts, but nearly all economists now agree that in some way the severity and duration of the Depression may be traced to government policy errors, not to a spontaneous breakdown of the market system.
Nevertheless, “an incredible series of policy errors” is now unfolding before our eyes. Presidents, prime ministers, and parliamentarians all seem to be acting under the sway of vulgar Keynesianism, as they stampede toward the enactment of promiscuous bailouts and “stimulus” outlays. At the Fed, Chairman Ben Bernanke acts as though he learned only one thing from his studies of the Great Depression: when the macroeconomy declines, keep dumping new money and credit on it until it says uncle and turns around. Finance ministers around the world appear to agree with this disastrous recipe for recovery. If only these masters of money had taken to heart one of Milton Friedman’s valid lessons, instead of this inflationary panacea.
Ernest Hemingway is alleged to have said, “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” Whether Hemingway made this statement or not, it’s true.
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Robert Higgs - 11/17/2008
That's the nicest thing anyone has ever said about any of my writings. Thanks!
Common Sense - 11/17/2008
Sounds like something you would see on The Onion.
William Marina - 11/17/2008
HNN's side-bar to your piece has an ad for Rick Shenkman's book, Just How Stupid Are We? The answer is, enough to have a Schooling System to keep most people in Ignorance of History. In the universities as well, it has become so fragmented as to discourage any broader analysis, what used to be called "a Philosophy of History."
The Empires March On, with the Decline of America's effort at achieving a Universal Empire.
Lester Hunt - 11/17/2008
That really didn't sound like that he-man pinko, Ernest Hemingway, but yes it is true!
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