Thursday, October 6, 2011


We are witnessing the end of the Keynesian Experiment.

Lehman went under in 2008, and there would appear to be a general recognition today, that the situation is at least as serious as at that time.

We are watching Dexia go under, only to be bailed out by Belgium, a state which not only has no Government, but whose actions will render the country even more insolvent than the bank it is endeavoring to save.

Both Societe Generale and BNP/Paribas have such massive short term liquidity problems, that they are probably already on stealth life support, provided by unsuspecting taxpayers. No doubt the French action to support Dexia is directly linked to the above.

Watching the Politicians, the Bankers and the talking heads on TV, one could almost believe that none of this could have been anticipated or prevented.

Phrases such as “unprecedented” or “could not have been foreseen” made popular by Gordon Brown, and seized upon by so many others, stick in the mind.

I would beg to differ, and cite the example of Ludwig Von Mises, (1881-1973), the famous Austrian School Economist. Mises believed that knowledge of Economics was central to our lives, that all people should study and understand it. He concluded that the only viable economic policy for the human race was a policy of unrestricted laissez-faire, of free markets and the unhampered exercise of the right of private property, with government strictly limited to the defense of person and property within its territorial area.

As regards excessive credit expansion he had the following to say:

There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”
It would appear that hubris, political posturing, denial, and ever more disastrous Government intervention, will lead us down the second path.

What a pity no-one listened.

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