Are the ravens leaving the Tower?

Ah, the good old BBC. For us limeys (I use this word only because Screwtapes' audience seems to come mostly from across the Pond), there's nothing quite like it. It's the oldest broadcaster in the world, and its name is synonymous with sobriety, calm reflection and (supposedly) unbiased reporting. It's hard to explain its place in the British psyche to non Brits. It is the news equivalent of a comfy pair of pyjamas: not very sexy, admittedly, but calm, comforting and trusted.

An old English legend goes along the lines that if the monarchy is about to collapse, then the ravens will leave the Tower of London (rather unsportingly, the current unkindness of ravens* at the Tower have their wings clipped to prevent such an event). Similarly, during the Cold War, BBC Radio 4 - the most hard-hitting, trusted, and influential source of news for Her Majesty's United Kingdom of Great Britain and Northern Ireland - formed part of the Royal Navy's letters of last resort: in other words, if the station ever went off air, it was to be assumed that London had fallen to a massive Soviet nuclear strike and our submarines were to immediately launch a retaliatory attack.

So, given all of the above, imagine my surprise in reading this report from the economics editor of Newsnight (roughly the equivalent of the US '60 minutes'):

Please read this article in full. It is the best summary of where we are currently that I have seen in the traditional media since 2008. It is, of course, UK-centric, but all of the arguments apply equally to the US and the rest of Europe.

Paul Mason is one of the three most respected economic reporters in the UK, along with Robert Peston (also of the BBC; he scooped the collapse of Northern Rock and predicted most of the events that have taken place since 2008) and Gillian Tett of the FT, who predicted the collapse of the sub-prime derivatives market and credit default swaps long before 2008. A gold-bug/anti-Keynesian/conspiracy-theory-loving Glenn Beck type he certainly ain't. A prophet of doom he ain't, either - or at least he wasn't until yesterday.

No, the fact that a previously 'main stream' (albeit highly respected) senior economics reporter for a flagship British current affairs programme could have produced something that would not look out of place in some of the more paranoid parts of the PM blogosphere should really tell us something. It's worth noting that the FT (perhaps the most staid of all UK broadsheets) is following suit, and appears now to be quite happily printing articles about $5000 gold.

The anti-Keynesian backlash is becoming mainstream. Gold's break from its well-trodden bullish channel (2008 - 2011) into a new, steeper channel has been to the traditional media what a red-hot poker was to Edward II's backside. Now even the most conservative analysts seem to be sitting up and taking note.

Some of you will be interested in all this simply because your investments in Au and Ag are likely to do very, very well over the next few years. I'm interested in it because it feels like a paradigm shift is taking place, and one in which the so-far relatively comfortable lives of millions will be utterly overturned. It seems to be only a matter of time before another big bank fails (SocGen, RBS, take your pick) and this time no-one will be able to afford a bailout. Be afraid.


* yes - that really is the collective noun for ravens.


Spicy Guacamole said...

The BBC article was very interesting. I'd agree that the standard Keynesian solutions are starting to lose support, opening up potential radical ideas like the ones discussed. I was particularly interested in Minsky's proposal:

"Minsky, who has followers on both the left and right, argued: socialise the banking system, rip up regulation for the private sector non-financial economy so it can grow, and abolish welfare, making the state the employer of last resort but forcing the unemployed to work."

A radical solution. Certainly, free market banking has wreaked havoc on the global economic system and it would perhaps be beneficial to take power away from the banks. But then capital allocation would be determined by central planners, which would breed corruption and mismanagement. Rather than socialize them, they should be allowed to fail and then force a radical restructuring of how they do business - one that promotes efficient long term investment.

In any event, there is no question that the current global banking model is going to collapse and whether that happens in an orderly, managed way or in chaos depends on the decisions our leaders make today. I'll be the optimist and believe that leaders are starting to realize what is going on and will come to the right conclusions in time.

Louis Cypher said...

It does feel like we are still driving the speed limit towards the cliff edge again.
The only options left are to turn the car around or floor it to try and jump from one cliff to the next because we can't seem to move the cliff. Jumping from peak to peak is not the long term solution though as eventually we run out of gas or have to try adding water to the gas tank.

To turn the car around we need to pull most of the regulations if not all that apply to small businesses. No small business man should have to hire an accountant just to file forms to feed the govt. No small business man should have to worry about govt regulations or hire a consultants to tell them if they are in compliance with all the govt agencies. No small business should have to think about hiring someone based on the cost of employer contributions to SS, Healthcare etc etc.
A small business guy should not have to spend more than an hour a month thinking about or filling out paperwork not directly related to his business. Until that happens we are dead in the water.