Written by Geoffrey Bastin

 

As you may recall, the Coronavirus 2020 Act is required to be voted on every six months, with the next review coming in September.

We must hope that sanity will prevail and the Act is dropped or repealed to allow Parliament to resume normal service. The Act in many ways was only required to allow vast sums of public money to be disgorged by the Treasury by way of grants and loans to keep much of British industry and commerce from going bust following those unnecessary lockdowns.

Grants to small and medium-sized businesses were vital, but as we emerge from the last eighteen months it’s long past time to call a halt to the further trashing of the economy. For that is precisely what has happened.

So what effects can this government largesse have in the long term? Well, when any government decides to pump up the economy with phoney (QE, quantitative easing) or borrowed money the only long term effect is inflation.

To inflate is to pump up, as you would a balloon. In monetary terms, it increases credit and allows and encourages prices to rise. Many years ago I can recall listening to Enoch Powell and his lectures on “the illegal acts of government” as well as the economist Milton Friedman’s “government is the problem”.

Mind you much is made of the inflation word to suggest a rise in prices. But that is simply a cost of living thing. It takes money from one pocket and puts it into another. The most misused expression lately is “house price inflation” which of course is not inflation at all but simply a price rise.

So as we turn to real inflation we realise it is all about pressure and volume. If you increase the size of the UK’s economy by injecting borrowed money it increases the size of the economy and reduces the value of the currency. Eventually it shrinks back to its former size, since all algebraic equations have to balance. Invariably it leads to calls for pay rises as the cost of living increases, although in the past we were told that that in itself is inflationary. Of course it isn’t; it is the consequence of inflation.

If we borrow money, for instance to buy a house, we are increasing our wealth by that amount knowing that the amount has to be repaid. But Governments continue to borrow and leave massive debts for those yet unborn to repay. It is an act of pure dishonesty that should never be forgotten. They falsify the state of the economy to “keep us happy” whilst attempting to ensure their re-election next time around.

No doubt there are still those that go along with John Maynard Keynes’s ideas for stimulating the economy, although those ideas are now somewhat superseded. His idea required surplus money to be available for the government to be able to spend at the worst times. But when did any government save for a rainy day?

Alas that has never been the case, for as we observed in 2008 with the bank bailouts it was only borrowed money that saved the day and from which we are still recovering.

Then along came our new friend Covid, and that Statute of March 2020 allowed parliament to abdicate its responsibilities and authorise huge sums in billions to be used by the Treasury and government ministers to rule by decree.

Some experts are predicting another run on the banks in the near future as a result of such reckless spending, which next time won’t be done as a bail-out but a bail-in. We’ve seen such methods used in Cyprus a few years back and that’s the reason we still have in place that maximum savings level of £85,000 in any one account. Without this no one would bother to save.

Stranger still is the saying of the WEF that we will own nothing and be happy.

Let’s hope all the really wealthy folk like Bill Gates or poorer mortals like Patrick Vallance, Boris Johnson and many other Tory toffs don’t lose too much as that would be a great shame!

I found myself writing to the ONS some time ago when they published their latest inflation details, using the price of chocolate and ladies tights amongst other irrelevancies to determine the monthly “Inflation Rate”. I pointed out their methods had nothing to do with inflation but only the Cost of Living.

The reply was simple: “Your ideas are interesting but that’s what we call it.”

As the last eighteen months has shown, for any government agency to twist meanings is nothing new, so why change the habits of a lifetime?

To quote Thomas Jefferson :

If the American people ever allow private banks to control the issuance of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their forefathers conquered. I believe banking institutions are more dangerous to our liberties than standing armies.

 

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