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History has taught us an important lesson: the surest way to destroy a civilization is to devalue its currency.
Recently, the political and financial elite have forgotten about this in their futile and hopeless attempt to pretend that we can still live beyond our means, the English newspaper writes. The Daily Telegraph in material presented without editorial intervention.
Arrogance, contempt, economic amnesia and short-term incompetent decisions have undermined monetary policy for years, both in the UK and elsewhere. As a result, capitalism began to lose its ability to work efficiently and in a balanced way. The obsession with near-zero interest rates and quantitative easing leads to misallocation, helps powerless politicians and gives the class a chance of unproductive business brainwashed bureaucrats.
The latest disgusting manifestation of this failed attempt to counter the difficult economic situation is the jump in consumer prices. Those who had savings were robbed: in the last year, rising inflation has inadvertently taken away 4.2%, and perhaps even 6% of the funds in bank accounts. The average working salary decreased in real terms. Tens of millions of workers, with growing dissatisfaction, are watching purchasing power fall before our eyes, and the national interest rate has not risen. And it’s happening despite talk of “equalization” and real wage increases in some areas, such as truck drivers.
A quarter of a century ago, Labor and Tories, having learned their lessons from the 1970s and 1980s, adopted the idea of hard currency, which eventually led to the independence of the Bank of England. It is now clear that the plan has failed: as in other areas of the economy, we have embarked on a path of regression. It was traditionally believed that the bank could not make the economy grow on its own: it could ruin everything or smooth out irregularities, but it certainly could not enrich us. This task belongs to the private sector and public policy in the field of taxation and expenditure. The best the bank could do was keep inflation low and stable.
Three factors changed this idea, replacing it with new, toxic group thinking. First, until recently, it seemed that low rates and money supply could not provoke a large increase in consumer prices. This is a misconception that globalization and technology have curbed inflation (ignoring the fact that prices for goods and services in the UK have risen by around 90% since 1997). Second, ideologically uncontrolled Tories no longer have an idea of how to increase GDP per capita: planned decarbonisation and increased spending on the northern part of the country do not cut it. The Tories believe that growth has slowed down for natural reasons and cannot admit that the new regulatory constraints, which are not working and are hampering the development of tax systems, are to blame, education and social security and, of course, monetary policy. Finally, during the financial crisis, statesmen realized that they could count on central banks to print more money and save it.
Central banks, for their part, managed to avoid responsibility for terrible mistakes by creating for themselves the image of the heroes and saviors of the world.
Politicians and bankers with tacit consent turn a blind eye to inflation and crush the economy with cheap money to somehow sustain growth. They support taxes and spending and increase the value of assets to mislead the majority that they are getting richer. The bank does not want to be blamed for destroying the economy or cutting government spending. The finance ministry, addicted to low interest rates, pretends not to be affected by inflation and is aware that the Bank of England saved itself by printing a ton of money during the pandemic.
However, the excessive rise in inflation is only a visible symptom of a disease that is destroying our society: the selfish interests of the ruling political-technocratic class have led to catastrophic consequences that are intensifying.
Cheap and easy money destroys conservatism and liberalism and takes Britain to the left politically, culturally and morally. On the one hand, jobs have become less paid, and on the other hand, over the last few decades, ultra-low loans and quantitative easing have significantly enriched 65% of the housing population, while 35% of those who do not have been pushed back.
The owners of some financial assets have achieved good results thanks to cheap loans, the situation is similar with indexed pensions, but other savers have suffered. Creditors lose debtors win.
This is not real capitalism on the free market, but its perverse resemblance, destroying the social contract and undermining the institution of the family. It sends a destabilizing signal that the only way to get rich is to be rich now, that thrift and hard work are a waste of time, delayed gratification is for fools, and debt-financed hedonism will solve all problems. This will lead to a monstrous class war, the far left will demand a tax on expensive real estate and all wealth in general, to raise minimum wages and untie the hands of unions, destroying all that is left of the economy.
Cheap money has already convinced politicians that the budget is no longer limited and that spending is now safe. The quantitative relief of the people, originally encouraged by the far left, is now widespread; many “experts” now say that our “extremely low” government debt must be increased by at least 50%.
Cheap money also fuels the development of progressive corporations, including the unproductive but highly paid segment of moral superiority. By hurting safe savers such as cash and high-quality securities, inflation has stimulated riskier investments in stocks and bonds and helped large fund managers, especially index funds, tighten their grip. These funds are not trying to beat the market. They have taken on the alternative role of progressive gendarmes, forcing private companies to register for projects that achieve environmental and social results.
Because of cheap money, companies get involved in low-profit projects, become lazy and less efficient. This has strengthened the worst kind of corporate bureaucracy, undermining the activities of many companies, which are now sacrificing profits for progressiveness.
This madness must stop. The Bank of England must raise interest rates. We need to move away from quantitative easing. The government must monitor spending. Either that, or wait until the biggest financial payback in history finally comes and society loses the last thing it has left.
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