The 1930s, and Worse

Good msing from Paul Mason of BBC on how we make things worse from here:

So then, in the absence of decisive policy action, you get a sequence that goes: crash (2008); stimulus (2009); failure of stimulus (2011); second crash (2011/12); deflation; involuntary collapse of globalisation. In that situation, which I profoundly hope does not happen, every government becomes like the Brüning administration in Germany after 1931, still trying to make the old policy work in the new world, increasingly resorting to decree.

via BBC News – Thinking outside the 1930s box.


  1. "how we make things worse from here"

    Christ. All. Mighty.

    It is Mervyn King (and Bernanke, and Trichet) who made things this bad. And he is "terrified" of things getting worse? WAKE UP PEOPLE.

    We have a MASSIVE lack of DEMAND. The central bankers allowed our economies to self-destruct in 2008/9. They sat on their hands and fretted about the banking system. They worried about inflation from oil prices. They allowed nominal GDP to contract in the UK, in the US, and in the Eurozone, and they have not allowed it to grow fast enough to make up the gap.

    The lesson from the Great Depression was that you use MONETARY POLICY to fix DEMAND PROBLEMS.

    You should be shouting this from the rooftops. There are tens (hundreds?) of millions of people unemployed across Europe, the UK, and the US, and this is what we get? Central Bankers fretting that things "might get worse"? IT IS THEIR FAULT. THEY DID IT. And they sit around pointing at each other, hoping Europe will fix its mess, or Greece will fix its mess, or blah blah blah.

    "low-inflation targeting" is as much of a problem now as the Gold Standard was then. If the Fed would switch to a 4% inflation target and commit to hitting it for a few years, the US would have a boom. It would explode with growth. Demand would return. Debts would get deflated. People would get jobs.

    And Mervyn King "did the maximum he could do", says Mason? Give me a break. Why is £75bn QE a "maximum", Paul? Paul, why are you making excuses for the man running towards you with a knife? He's a nice man, I'm sure. But you expect the nice Government should come along and save you? Fiscal expansion cannot save you from monetary policy makers intent on depressing the level of demand. It is they who are "pushing on a string".

    Read Scott Sumner.

  2. James Cameron says:

    Commentary like this is becoming more commonplace, of course, as Europe dithers. Here, for example, is Roubini:

    Coming from Roubini, no surprise I suppose. Nonetheless, anything close to what these commentators are discussing would have all kinds of social and political repercussions that I think very few of us want to think about, or. for that matter, may be capable of thinking about since it's so far outside of our realm of experience.

  3. ToddPalin says:

    Everybody together …. history does not repeat … it merely rhymes … so think Creditanstaldt … and considering the Paul Mason piece …. what llok s like Creditanstaldt today? ….. Europe ….. withdrawal crisis ….. bank collapse … have to go ffo gold standard …. migrates quicky to NYC as eurodepositors have to withdraw …. NYC banks go down …. hits all USA banks ….FDR ends gold ownership to 'try' to break cycle

  4. Guess the question is where the next war begins.


  1. […] let us stick to this TGS – the blog. Paul Kedrosky recommended reading this missive from Paul Mason of BBC. I duly followed the link. In the end, I came away […]