The Economy is about to Change Rapidly

The Economy is about to Change Rapidly. By Andrew Lees.

Yet another US CPI upside “surprise” yesterday:

U.S. ten-year real GDP growth has been slowing steadily since 1957 when Bloomberg records began …

Just as the Great Depression was caused by Hoover’s and then Roosevelt’s fight with the private sector, so the slowdown in growth in recent decades has been due to government moving prices away from their true value to government dictated value.

It was not until Roosevelt realized that the only way the U.S. could win WWII was with the help of the private sector that he took his foot off its throat, allowing the economy to boom.

To prevent the system clearing, and thereby maintain the narrative by which it defines society, government will get much bigger, imposing substantial economic damage, hence the decline in real yields and comparison with the Great Depression.

What will government’s policies of decline be? … They will clearly include renewable energy policies and a continued war on fossil fuels, lower interest rates and base monetary expansion, and almost certainly a central bank digital currency allowing interest rates to go negative. … [There will also be] more transfer payments and government programmes, … far more corporate consolidation and asset price inflation, squeezing of the middle class, and increased inequality. …

The blame for the decline can be put firmly at the door of big government, which in the modern era, covers all main parties. As there is a real cost to all output, and society naturally self-orders to optimise the output, any movement away from a free society [and a free mmarket…] will always be at the expense of a loss of capital, and therefore, lower potential growth….

According to the book, The Forgotten Man, the depth of the Great Depression reflected the scale of the government’s ambition to squeeze out the private sector. By the time WWII began, the public sector was dominant. The contest was a brutal one, fought across the country as the government imposed its will on society and industry, no matter the economic and societal cost.

As Roosevelt said in his 2nd inaugural address, he sought “unimagined power”. He would target monetary control, taxation, and control of utilities and resources to enlarge the public sector as much as possible. … Even in January 1940, … before Roosevelt had called Bill Knudsen of General Motors fame to ask for the help of the private sector in fighting the war, unemployment was still 14.6% compared with 3.3% before the Crash and 17.4% in September 1931. …



The next decade is going to witness a similar fight between the public and private sectors as government adopts increasingly desperate policies to try and counter the stagnation in output that its policies are imposing.

As we are seeing with energy’s growing share of GDP, its policies are so destructive, that the only way it will be able to prevent the system clearing is by taking substantially more control, moving it further away from productive reality to its own narrative. This will mean setting the “price” of everything, not just goods and services, but as we are already seeing, the value of different people and ideas, and even what “science” says, as is already apparent with Covid and energy policies.

Ultimately, as “Big government” is the imbalance, the fight it is waging … is against society. As political capital, by definition, treats people other than in accordance with their productive worth, it is a path of decline.

Governments setting prices always causes problems. The more they do it, the worse it gets. Instead of arrogantly assuming they know best, they should just leave the economy alone and people will optimize it for themselves.

The world’s best economies have, historically, been those with the least government interference. The low point of interference was probably the western economies in the second half of the 1800s.

Here in the West, the most important price of all, the short term interest rate, has been set by bureaucrats by decree for decades now. How’s that working out? Do zero-interest rates sound right to you?

How did price-setting by bureaucrats work for the Soviet Union?

Bureaucrats fixing economic “problems” of their own making always reminds me of the Old Lady Who Swallowed a Fly.

Btw, think the low unemployment rate will save us? Unemployment is always low before a recession:

hat-tip David Archibald