Sunday, 10 April 2011

Bill Jamieson is wrong

In today's Scotland on Sunday Bill Jamieson writes about the Eurozone bailouts.

Correctly, Bill starts by apportioning some of the blame to those countries already on the bailout list:

In this analysis, we cannot absolve the governments of these countries for a large measure of responsibility for the desperate state their economies are in. Greece fiddled the figures it supplied to the Eurozone authorities to qualify for entry. Its statistics now have to be independently verified.

The Irish government turned a blind eye to the galloping personal and corporate debt explosion that occurred under its watch. Portugal has failed to modernise its industries and undertake restructuring to stop its economy becoming ever more uncompetitive.

Unfortunately, Mr Jamieson goes on to say this:
It is now painfully obvious that a "one size fits all" interest rate regime was a fatefully simplistic project - poorly thought through, blind to potential problems and wilfully insouciant to warnings that across such dissimilar economies, problems and tensions were bound to arise. Whoever thought that Germany's strict anti-inflation culture would allow for the different economic composition and dynamics of countries as unlike Germany as Portugal and Spain?
I disagree completely. Needless to say I'm not supporting the existence of a fiat currency like the Euro. But I am opposing the easy call for countries like Greece, Portugal and Ireland to be able to seek salvation through devaluation of their own restored currencies.

Let's not beat about the bush. Devaluation means that you granny's life savings are to be stolen so as to bail out the imprudent. That's also the shameful policy of the current "Conservative"/"Liberal" government here in the UK. And that's what Bill Jamieson's policies would mean for Greece, Portugal and Ireland.

The key point is that devaluation is an invariable consequence of a fiat monetary system. That's exactly why the political class opposes sound money. They want to steal your money. The proper libertarian solution is to get government out of the money business altogether. Governments should not create money, they should not have central banks and they should not guarantee deposits.

Throughout history free people have invariably chosen a form of money that's based on something that's already been valued in the market place for other uses. Given choice, it is highly likely that people would pick precious metals like gold and silver as money. That in turn would mean that the same homogenous money was in use throughout the free world. It follows then that worldwide interest rates would converge according to the global supply of and demand for savings. That supply and demand for savings would be driven by the way in which people throughout the world valued future goods over present goods.

In such a world there would be no continuous theft of your granny's life savings by the political class. Governments would have to live within their means, however shocking a concept that may be. The Greeks, Portuguese and Irish governments should live within their means. So, of course, should ours.

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