A Letter Requesting Information on The Policy of Quantitative Easing (Printing Money)

Over my last two posts (UK Government and Money Printing - More 'Funny Business'? and It's Official - the UK Government is Now Bankrupt), I have highlighted that the Bank of England is about to finally embark on the policy of 'Quantitative Easing', otherwise known as printing money. They have suggested that, amongst the assets that they will be buying will be gilts, which is a purchase of government debt. This means that the Bank of England will be, in some way, funding government borrowing through printing money.

I took a look at the information being provided by the Bank of England on this policy, and found it lacking in any kind of detail whatsoever. One of the documents that I found on the Bank of England website was a report on a press conference on the subject, which showed that the press were simply not asking the right questions. In fact, although it sometimes appears that they are asking some cutting questions, their performance brings the word supine to mind. They failed to ask any of the most basic questions that should have been asked.

The Bank of England is about to embark on a very drastic and radical policy, and the press completely failed to ask for any detail on how the policy would operate. The policy will mean a massive increase in Bank of England intervention in various markets, and that this will have profound implications for the economy, but the press asked for no detail....???

As such, I have sent a copy of the following to the Bank of England email address for press enquiries, and a copy to their general information address:

I write for Cynicus Economicus, and have had some trouble finding clear information regarding the Bank of England's policy on Quantitative Easing (QE).

As such, I would be most grateful if you could provide the following information:

1. What quantity of money will the Bank of England be adding to base money in the period March-May, and the period June-August 2009? Please give totals or ranges under consideration, and any projected figures that you are using as the most likely scenario?
   
2. In what form are you planning to add the money? This is the question of which assets the Bank of England will buy as part of the QE operations? Can you give a projected split / proportion of which type of assets will be purchased in the period March-May, and the period June-August 2009? Please give totals or ranges under consideration, and any projected figures that you are using as the most likely scenario?
3. Can you give a clear description of how the split/proportion of assets to be purchased under QE has been determined?
   
4. If you are unable to answer questions 1,2, & 3 can you confirm that this is because you have no firm plans for what you will be undertaking in relation to quantitative easing? If there are no plans, can you give a clear description of your criteria for the decision making that you will use in determining how much you will purchase of which kind of asset, under what circumstances?
5. Can you give a clear description of the method you will use to purchase each asset class? In particular will you undertake any action to purchase gilts, or an other form of UK government bonds, directly through the UK Government Debt Office auction process or any other direct means?
6. In a recent press conference Mervyn King suggested that the reporting of QE would be undertaken in the minutes of the MPC. Can you confirm in detail exactly what information will be provided in the minutes?
7. The MPC minutes are not (I believe) intended as a reporting tool for activity such as QE. As such, why is the policy and action of QE not being reported in a formal publication dedicated to this policy? In particular, QE is widely seen as a radical policy, which Mervyn King describes as 'unconventional'. Under such circumstances, with significant implications for the operations of markets and the broader economy, why is no formal and transparent method of reporting being implemented?
   

In any reply, please do not refer me to documents that do not answer the specific questions that are being asked. The questions are very direct and very clear, as I believe that my readers would like very clear and direct answers. There is considerable concern about the policy of QE, commonly referred to as 'printing money', and I am sure that you would wish to provide the information necessary for people to understand this policy, and how it will operate.

Thank you in advance for a full reply that answers these questions in a way indicative of a desire to be open and transparent in reporting your activity.

This is the second time that I have sent a letter to the Bank of England, and the first letter was on a related subject. I asked them to confirm that they were planning to report the amount of money they created under the QE policy. They ignored the last letter, so I hope for a response this time.

The reason that I am writing the letter is that I dislike conspiracy theory, and will always seek to clarify any suspicions that I might have. In this case, if the Bank of England is doing nothing that might alarm people, I can see no reason why they might not respond. To not respond to one email might be an administrative oversight, but to fail to answer two starts to look like they do not wish to reply.

I would also expect that my questions might prompt them to issue a press release, as these are all perfectly reasonable questions that people might reasonably want answered. After all, printing money to buy government debt is something about which the public might have concerns. My email simply highlights the kind of questions that might be asked.

I will let you know next week whether I have been sent a reply.

Note 1:

I have just seen that on my last post but one, the headline was poorly written. I have now changed it. Inevitably, with no editor I will make many errors, but to make a crass error in the headline has left me rather shame-faced. The error was writing Its instead of It's ....

In light of the rather bad error, I have simply changed the headline. Normally, if I make any change to the content of the blog will add a note including the date and nature of the change. In this case, I have not left a note on the original post, but thought I should mention the change somewhere. Thus this note...

Note 2: Thank you for the many comments on the last post. I can see that many share my concerns. As you may have noticed I have been busy with posts on QE which has left me little time to reply to comments, so please accept my apologies for not responding on this occasion.

Note 3: It may actually be a good idea to start a campaign on this subject. I really do find that this opacity is quite shocking, and do not think that the government should get away with it. As such might I suggest a letter writing campaign to your local MP. You can find the email address for your local MP here (click on the map for your constituency).

This is is my suggested letter which you can copy and paste, or alternatively write your own version:

-------------------
I am writing as I have very increasing concerns over the recent Bank of England policy to implement quantitative easing. In particular, I am worried about the following:

1. There is no policy document that clearly outlines how this policy will operate, what quantity of money will be created, what assets the money will be used to purchase, and what method will be used for the purchases.
   
2. In addition to this Mervyn King has suggested that the method of reporting for Quantitative Easing will be through the MPC minutes. This is not the purpose of the MPC minutes, and there is no requirement for full disclosure of activity in such a method of reporting.
   

This is all very opaque.

I am very concerned at such opacity in consideration of the fact that the Bank of England will be using money creation to purchase gilts. In this situation the Bank of England will therefore be creating ('printing') money to purchase government debt. This might be seen as government operations being funded by printing money.

Under such circumstances, it would be reasonable to expect the Bank of England to offer a transparent and detailed discussion of the policy as a formal policy document, as well as a formal, full and transparent procedure for reporting their activity.

I would therefore be most grateful if you could, on my behalf, seek to clarify why this process is being undertaken in such an opaque manner, and clarify exactly what the policy will be. I would also be grateful if you could press for a proper method of reporting on the policy of quantitative easing.
------------

Additions, suggestions for improvement will be welcomed. Just leave a comment below.

Conspiracy and the Collapse of the UK Economy - and why the US will be next

Note: This post takes a slightly winding road to a rather disturbing conclusion. The winding nature of the discussion does have a purpose, so bear with it....

I thought I would start today's post with something a little lighter than usual, before moving into darker matters. I found the following quote pertaining to the request for a bailout for the UK car industry:

Unite joint general secretary Derek Simpson said that intervention must come within the next week. "What is being asked for from the Government is not a handout, not a gift, it is access to strategic funding for a sector that is key to our economy's global stature and one that will play a lead role in its emergence from this recession."

So there you have it. It is not a houndout or a gift, but 'strategic funding'.

Meanwhile, in the US, the bailout of the motor industry has started for real. As I have mentioned in this blog previously, the US 'big three' were in trouble long before the economic crisis arrived, and there is no reason to believe that the fundamental problems of the US car industry can be rectified in the few months of operations covered by the bailout. In other words the bailout is very much akin to burning of money, as it is certain that the auto companies will need more help in March, or will fall into bankruptcy. It is interesting to note that Cerberus, the owner of Chrysler, is unwilling to put further capital into their sickly child....

I wrote about the symbolism of the US car industry a couple of months ago. In particular Ford (the least unhealthy of the big three) is symbolic of the US as an economic power. I mentioned at that time that there was a view that the company was 'too big to fail', and related this to the attitude of the US as a whole. Just as the car companies are too big to fail, there has been an attitude that the same is true of the US as a whole. However, the car companies are failing because, just like the US economy as a whole, they are bloated with fat. We are living in times when assumptions are going to be tested, and the assumption that the US will always be an economic power is an assumption that looks very shaky. As yet, there is still an ingrained belief that the US can not fail...

I have read an interesting article in the Times, regarding the weasel worded quantitative easing in the US (printing money for those who have not had the expression explained).

Quantitative easing is, in essence, what you do as a central bank when you have run out of things to do to avert catastrophe. It is that moment in the horror movie when you are backed up into the kitchen by the intruder and you start pulling out the kitchen sink as your last weapon.

The columnist is quite right that it is a measure of the desperation of governments to reverse the slide. The columnist discusses the dangers of deflation, and places printing of money in this context. However, at least he is aware of the risks:

The biggest risk is in storing up trouble for the future. When inflation gets going, the central bank will have to be very quick to reverse course: mop up all that excess money and push interest rates much higher. That won't be a pleasant policy for an economy just starting to recover. But it's a problem that the Fed would love to have right now. Not that those central bankers would put it quite that colourfully.

At the moment, the US is getting away with this policy, as there is still a prevailing view that the US is too big to fail, that the $US is 'the' reserve currency, that so much trade is conducted in $US and so forth. I have long argued that the fate of the US economy is symbolically tied to the fate of the UK economy. The UK is a major Western economy, and the failure of the UK economy will be a major step in raising the question of the viability of the US economy. At its most basic, if the UK can fail, then why not the US? I will therefore discuss the failure of the UK economy, which is even now collapsing, but with the government trying to hide the reality of that collapse.

The UK is now at the stage where the markets are now seriously confronting the fact that it is a basket case. I had the following to say, back in November of 2007:

All the while this is happening the government will fall into crisis. With a falling pound, an economy collapsing around them, and an already overstretched borrowing position, they will be faced with ever more expensive borrowing, meaning higher interest rates, or massive cuts in public expenditure. There will be no room to manoeuvre. The only solution will be to cut back on expenditure. Continuing to borrow will be too expensive, and would destroy the value of the pound, as well as creating an even deeper crisis of credibility that the UK government can manage the economy.

There is no cut back in expenditure, borrowing is out of control, and the currency is responding exactly as I predicted it would. We have this article on the relentless collapse of the £GB:

The devaluation is only matched by the moment in 1931 when, under Ramsay MacDonald, the UK was forced to abandon the gold standard, plunging by more than 24pc against the dollar. The parallel is significant, since many economists have attributed the gold standard exit as one of the main reasons the UK enjoyed a relatively mild depression in the 1930s, while the US suffered mass unemployment and saw its economy shrink by a third.

It is an interesting comparison. However, today is not the 1930s. The UK was not saddled with the bloated infrastructure, bloated government, and still had a massive manufacturing sector. I can not emphasise enough - it is not the 1930s. It is a new century, and the UK has a very different economy from that time. It no longer has the huge manufacturing base to allow for an export led recovery. The devaluation of the £GB will not create an overnight competitive edge for the UK economy, as manufacturing will take a long time to respond to the new competitiveness. There is simply not enough of a manufacturing base to make up for the collapsing service economy (including the collapse of financial services). The same can be said of the US, where the state of the car industry is symbolic of a widespread decline in manufacturing in favour of the 'service economy'.

From the same article:

Although some are warning of a full-blown sterling crisis, the Bank believes that the fall in the pound, provided it does not accelerate, could benefit the economy by pushing up exports and boosting UK revenues in the coming years.

It may also prevent rates from having to fall to zero, since a weaker currency tends to generate inflation. Importantly, investors are not shunning UK government bonds, indicating that they have not yet lost faith in the authorities' ability to deal with the economic crisis.

It is in the last paragraph that my concerns are rooted. The big question for the last point in the quote is who exactly is buying the UK government bonds? Is it the UK banks, attempting to shore up their balance sheets? If so the government is lending money into the same banks, who are then lending it back to them. It is for this reason, I suspect, that the Bank of England is planning to print money, and the same reason why they changed the law in the banking in an Act of this year as follows:

235 Weekly return
Section 6 of the Bank Charter Act 1844 (Bank to produce weekly account) shall
cease to have effect.

The act can be found here, and the relevant section is on page 115. Here are the words from the original act of 1844 that has been repealed (to be found on the first page of the pdf copy on the BoE website):

6 Weekly account in form in schedule (A.) to be rendered by the Bank of England
… An account of the amount of Bank of England notes issued by the Issue Department of the Bank of England, and of gold coin and of gold and silver bullion respectively, and of securities in the said issue department, and also an account of the capital stock, and the deposits, and of the money and securities belonging to the said governor and company in the banking department of the Bank of England, on some day in every week to be fixed by the [Commissioners for Her Majesty’s Revenue and Customs], shall be transmitted by the said governor and company weekly to the said commissioners, in the form prescribed in the schedule hereto annexed marked (A.), and shall be published by the said commissioners, in the next succeeding London Gazette in which the same may be conveniently inserted.

Essentially, it now possible for the Bank of England to print money and not tell anyone about it. I was originally made aware of this on the Guido Fawkes blog here. I have previously quoted several reports that there have been problems for the government in raising finance. I will once again quote one of the articles I used before:

The UK and Italy struggled to sell bonds on Thursday in a fresh sign of the difficulties governments are facing because of the debt needed for economic stimulus packages and bank recapitalisations.

The two bond auctions saw both governments forced to pay higher yields to attract investors and Italy scaled back the amount on offer.

Analysts say it is an “ominous” warning that debt raising is likely to become even tougher in the coming months if problems are emerging so soon after government announcements to increase issuance. A record of more than €1,000bn ($1,290bn) of debt is expected to be issued in Europe next year

Back in November of 2007, when I wrote 'A Funny View of Wealth', my argument was that the UK's economic growth for the last ten years was built on a bubble of debt. This has now been partially accepted by mainstream economists and the media. However, they have never really fully accepted the implications - possibly until now. My belief, and it is no more than a belief, is that the government, and the Bank of England have finally realised the scale of the difficulty. The wall of cheap credit that flooded into the UK market is gone, and nothing much is left of the UK economy without that financing. I have estimated previously that the UK GDP has been overstated by about 30 % (I am being conservative in this estimate), due to the multiplier effect of all the borrowed money flooding into the economy. The economy is now contracting back to the level of non-debt inflated output.

As a result, we are now in a position where the government finances are sinking faster than the already pessimistic predictions of the government. From the Telegraph:

Official figures show that the budget deficit climbed to £16 billion in November, the largest since records began in 1993. In the same month last year borrowing was £10.7 billion.

Over the first eight months of the current financial year, the Government borrowed £56.1, nearly twice the £29.2 borrowed in the same period last year.

The public finances are worsening sharply as companies lay off staff and unemployment rises. Gordon Brown's moves to bring forward some public spending projects amid the recession has also put the budget under more pressure.

Government receipts fell by £2 billion in November from the previous year, to £35 billion. Income tax receipts were down by £1.4 billion.

Meanwhile, spending was £47.6 billion, up by £2.9 billion from last year. Benefits payments rose by £1 billion as more people lost their jobs and started claiming welfare.

In the Pre-Budget Report last month, the Treasury set out plans to borrow £78 billion this year. Over the next five years, borrowing will rise by £500 billion and the Government's stock of debt will exceed £1 trillion.

And now, my prediction from 'A Funny View of Wealth':

The second implication of a recession, or depression, in the UK economy is that government spending will almost certainly rise in relation to government income, as tax receipts will inevitably fall [italics added]. In this case the proportion of borrowing going towards spending will rise to pay for unemployment benefits, managing increased crime and all of the other associated ills of a poorly performing economy - unless the government chooses to cut spending overall.

In other words, as expected, government revenues are collapsing, whilst costs are sky-rocketing. When I wrote these words, I had no idea that the government would also dig themselves ever deeper into a financial hole with the string of bailouts. As such, the situation is far worse than I ever envisioned....

Here we come to the crux of the issue. Even as I am writing this article, the UK government is sinking into bankruptcy. I am not a conspiracy theorist, in that I do not believe there is any grand plan to create a new world order. However, I do believe that individuals and governments do occasionally conspire to deceive the public.

I actually believe that, at this moment in time, there is a conspiracy. That conspiracy is not the result of a great master plan, but is the result of the ongoing incompetence of government, and is a desperate attempt to hide that same incompetence. Over the last ten years, the UK economy has effectively been supported by borrowing, and without that borrowing it is collapsing. The government does not want to admit to the public just how bad the situation actually is and, as a result, they have come to the point at which they are resorting to ever more desperate measures.

I believe that what we are witnessing is an appalling conspiracy. I believe that the government is planning to use printed money to finance the banking system, and as a quid pro quo, the banking system will finance the government borrowing with the printed money. The repeal of the provision of the 1844 Act is an attempt to cover up the actions of the government. If I am right, we do indeed have a conspiracy.

The most tragic part of all of this is that the conspiracy, the idea of printing money, will just make the final catastrophe even greater. It is a an economic Ponzi scheme. It will finally end in tragedy, and makes the government no less criminal than the now infamous Madoff fraud. Printing money to lend to banks to then lend to the government is completely unsustainable, and will lead to hyper-inflation. In the case of the US they are still getting away with money printing, because the $US has not weakened significantly, meaning that they are not yet importing inflation. In the case of the UK, the £GB is collapsing, and inflation will therefore be imported. There will be a lag in the importing of inflation as there is a time lag as contracts are renewed, and as previous contracts run their course. However, we have already seen the inflationary effects in the increase in the price of food, which is a far more responsive sector than, for example, imported electronic products from Asia.

Now, to return to the Ponzi scheme. Part of me hopes that I am wrong, but there is just too much coincidence and, when combined with the inevitable weakness of individuals trying to hide their failures/incompetence, we do have the makings of a potential conspiracy. The situation can be summarised as follows:

• The government has taken stakes in many banks, allowing them a direct line into the operations of the banks
• The banks are increasingly reliant on government finance for survival
  
• The £GB is already collapsing
• Government finances are in tatters, and the government is finding it increasingly difficult to raise finance
• The BoE has admitted consideration of printing money, and then there is the repeal of the 1844 Act

No smoke filled rooms to plan world domination, just a desperate scrabble by the government to dig itself out of a hole. This is the stuff of real conspiracy. Attempts to hide incompetence, ineptitude, and downright foolishness. Unlike the US, the UK does not have the luxury of confidence in the currency, and this is why they need to hide their activity.

And the consequence, like all Ponzi schemes, will be a collapse, and then the dominoes will start to topple. The US will be next. The bubble of the value of the $US is set for collapse, and only a false confidence in the $US will continue to support it. When the UK Ponzi scheme collapses, it will take the US with it. As I stated, when the UK is seen to be built on foundations of sand, the same question will be asked of the US....

.....as there are too many commonalities between the problems for each of the economies, and commonalities of the 'fixes' being implemented. The countries are mirrors of each other.

After all - the US is already running the printing presses. They have outsourced swathes of their manufacturing. They have built a 'service economy' funded by debt. They are, and have, run comparable trade deficits. The government has bailed out the financial institutions, and has the same influence on banks. US bonds are selling despite negative yields. Government debt is spiralling. Unemployment is going up, as are government costs. Revenues are going down. I could go on....

Note: I sincerely hope that I am wrong in all of this. I have always been very gloomy about the prospects for both the UK and US economies (though initially I was more optimistic for the US - I shared the same false confidence that many hold). However, the magnitude of the foolishness I am contemplating in this post is of a scale I find hard to accept. There is a part of me that is suggesting that what I am writing must be mistaken. However, each time I have the thought, it is crowded out by what I can see before me. As I said, I hope that I am wrong....

Note 2: I will try to respond to some of the comments made on my last post, and also on the taxation post, later today or tomorrow.

Note 3: I have had the first comment on the post (see below) from 'anonymous' and it was such an excellent and well written comment that I thought I would respond immediately. Anonymous asks:

It's madness to think that once the ship, SS Gt. Britain (which is terminally holed below the waterline) has been righted, that everyone can climb back on board and resume partying.

So what has got to be different? What new direction is capitalism to take? Have they a plan B?

The answer, in short, is that there is no grand plan, no vision, just events and reaction to events, and a collective burying of heads in the sand. It is why I suspect that they are engaging in the deception, and it is why I am so concerned. There is no plan A worth speaking of, just scrabbling in the dirt, hoping (with a sense of despair) that it will all come right. There never was a clear plan, no thought to the long term, nothing but hopeless dreaming.

Plan B, - without a plan A, I think not.

For the question of the new form of capitalism, I think I have answered this throughout the blog. Life is going to get tougher, as we live in a period of hyper-competition. As for the form of Western capitalism, I am not sure. Either we can dream alongside our leaders, in which case we are finished, and condemn ourselves to decline. Or we can accept the nature of the world that, day by day, is revealling itself to us. That means we accept that we have to change, and those changes will be hard to live with. That is why I also publish ideas on how we can move forward....

Thank you for an interesting comment, Anonymous.

Economic Crisis - Conspiracy and the New World Order?

I have had some comments that have suggested that the crisis is all a big conspiracy for a new world order. As regular readers will be aware, I am more inclined towards the principle of foolishness and stupidity. I followed a link to the Daily Kos, and had a quick look through an article to get a feel for a feel of how these theories are being presented. I remain unconvinced that this is all the result of a plot, but do have concerns at the power that might be taken by government resultant from nationalisations, and the cosying up of world leaders to 'fix' the problems. The latter brings to mind a quote from Adam Smith:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." (1)

Whilst not entirely apt, I think that the idea carries over to this well. This leads neatly into the current state of the panic that is driving countries to act in unison. There is this from the IMF Chief Economist, reported in the Times:

'“Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.” Countries would need to take further measures, including interest rate cuts and steps to bolster the banks. '

And the result of this panic can be found in another Times article:

'THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline. The unprecedented move will make the government the biggest shareholder in at least two banks'

As the conspiracy theorists have correctly identified, there is the G7 agreement that there will coordinated action, and it is looking ever more likely that the action of the UK government will be a template for the actions of other governments. I will not rehash all the latest news on the crisis from around the world, as I think the IMF Chief Economist has neatly summarised the situation, and the rest is a matter of detail. Meanwhile, one of the interesting outcomes is that several commentators have noted that this crisis and the international grandstanding have been helpful for Gordon Brown. In the US, the lame duck presidency of Gerorge Bush is now probably beyond any such boost.

The question is whether any of this supports the idea that all of this was a conspiracy? If we view the records of those who would have to be 'in' on the conspiracy the records do not inspire much confidence in their ability to manage something so complex (and fiendish?). However, a more valid point to make is that, if we trace the underlying causes of the current crisis, as I have done on this blog (see here for an introduction) it is apparent that nobody in their right mind would have engineered this crisis. In particular, in the case of the Western world, they would have had to not only have planned the financial crisis, but also accepted as a price the loss of power and long term economic decline for the West. This is not a scenario that would appeal to conspirators, who I am guessing would seek to enhance their power overall. After all, far better to have control over an uber-powerful state than a diminished one. If they were that 'cunning' and powerful, I am sure they would have engineered a far better outcome.

Whilst it is always very exciting to imagine smoke filled rooms (think of the X-Files), filled with old guys plotting an planning their evil schemes, there really is no need for such a scenario. Stupidity, wishful thinking, herd thinking, and all of the other foibles and weaknesses to which humans are so prone are more than sufficient to explain the origins of this crisis. For the conspiracy theorists out there, sorry to disappoint, and I am sure that I will lose readers for saying this, but there has been no conspiracy. The only exception in all of this may well be China, which I believe has deliberately sought to gain economic power through whatever means, fair or foul (see post here which discusses the subject).

On the other hand I do believe that the new concentrations of power going to the state are a matter for genuine concern, as is the idea of world leaders and central bankers trying to co-ordinate the world economy. For the former, it will certainly give the state too much power, and for the latter, it should be remembered that these are largely the people that presided over the build up to this mess. However, all of the grand plans for the nationalisation of financial systems rest on the idea that the Western economies are going to be able to continue to borrow their way out of trouble, and I have often expressed my reservations about how long this can continue. There have been stories circulating in the news of other organisations going cap in hand to governments for bailouts, and it is impossible to see how governments can, through borrowing, support this level of damage.

Overall, my largest concern is that government intervention in the markets is a large part of the cause of this crisis. In regulating the banks, they allowed everyone to become complacent about the operations of the banks. For those who are not regular readers, and have been hearing endlessly about lax regulation, you will need to read my post here. Essentially, in trying to regulate away the risk of bank failure, governments have set up a system in which failure is likely to be catastrophic. An occasional bank failure serves to remind us all that the banking system needs careful attention. On top of this the poor measures of GDP, the misuse of interest rates, and many other factors suggest that governments are a large part of the problem (I discuss some of these problems here)

As such, based on the record of governments, my worry has consistently been that governments will do more harm than good, and governments acting in concert is therefore an even more worrying development.

I think that I will leave it there for the moment. It will be interesting to see what events the start of the week will bring. How will the concerted action be enacted, and will it create a momentary calm, or will the storm continue unabated? If it is calm, it will simply be the eye of the hurricane, and the full force of the storm will resume in time.....

(1) Adam Smith., The Wealth of Nations, Book V, Chapter I, Part III, Article III

As a note, have others seen the conspiracy theory predicting the 'Amero' (I think) as a replacement for the $US. I have seen it referenced a couple of times, but would like to get a good reference on what it is all about. It is more than likely as unfounded as the other conspiracy theories, but I try to keep an open mind. As such, if you have one, I would appreciate you posting a link in the comments.

Note 2: For some reason something went wrong with the formatting on the blog - thus the changes. For a little while, about an hour or two, the home page was not showing correctly. Apologies if you found it with this problem.....

Note 3: I have had a long comment from an anonymous poster (see below). He apologises for a long comment. However, there is no need to apologise as I welcome all comments. Another poster comments that they had problem leaving a comment. I am not sure why this would be the case, but my editorial policy on comments are that they are all posted, provided that they do not use abusive language or spam the blog. To date (happily) I have not encountered either of these problems, so have published all comments. As such, I am not sure what prevented the publishing of the first post from the commentator, but would assure those who wish to comment and disagree with me that their comments will be published (within the limitations I have just mentioned). In the meantime (for the commentator who had a problem) please accept my apologies that you had a problem in getting your comment published, and I hope that you will accept my assurance that this was not due to my editing it out. As a final note, one commentator posted a link which was somehow chopped. The link is as below:

http://disclose.tv/action/viewvideo/9899/NAU__Hal_Turner_Shows_New_AMERO_Currency/

Note 4: Yet more glitches here. I have just noted that the home page is showing zero comments on the post, despite there being several comments. However, if you click on the comments link below, the comments are there. I have also checked in other parts of the blog, and the comments are fine. Please accept my apologies for all of these problems, and I will try to work out what is going on. I am hoping that the problems are just with this post (though I can see no reason why this would be the case).

Note 5: I have viewed the link provided on the Amero, and dug around a little bit, including viewing the blog of Hal Turner. The first point of note is that the only evidence provided is a coin which he claims is the Amero (having a coin made I would guess is not very difficult). No other evidence. The next point is that he is a white supremecist, and that gives me cause to doubt his motivations. I followed some of the links, and none of it was backed by evidence. However, the one thing that I believe is correct is that there is likely to be a $US collapse, but that is a different thing from saying that the 'Amero conspiracy' is real, or something that has been planned. In short, I have seen nothing to persuade me of a plot. As such, I invite any hard evidence (leaked documents verified as genuine by a reputable source etc.) to support the Amero conspiracy.

Conspiracy, perhaps not......

I received an unusual question today, as follows:

'Reading your essays one can't help but wonder at the enormity and depth of the government cock-ups that have made us the country we are today.

Looking at the exquisite perfection of the US and UK's problems, do you ever, just for a fleeting moment, wonder whether any of this might have been deliberate?'

I hope that I have not misunderstood the intent of meaning of this poster. It appears that there is a suggestion of conspiracy, that there is some malign purpose in what is occurring in the UK/world economy. I am not sure I have it right, but I will answer on that basis.

The short answer to this question is 'no', there is no conspiracy.

My own view is that the current situation stems from group think, vanity, pettiness, personal ambition and sometimes (good, old fashioned) stupidity.

For example, if we take the sub-prime fiasco, what were the causes? The answer is simply that someone came up with a very clever way of repackaging debt that separated risk away from the lender. It allowed for a massive expansion of business and, to those selling instruments such as CDOs, it allowed for big profits to be made. As such, the problem was created by the urge to make money. The stupidity part was that the same institutions that enjoyed the benefits of selling toxic loans were also, through other parts of the institution, directly or indirectly, buying such toxic waste. I have every confidence that there were people within the organisations that were highlighting the dangers, but they were more than likely sidelined. After all, who wants a party-pooper when it all appears to be going so well? Why spoil the party? In such circumstances, no one likes the person in the meeting who is asking the awkward questions.

If we look at government handling of the economy, for example the UK government, we can ask the same kind of question. What caused the government to follow such a disastrous economic policy?

In the case of the UK Gordon Brown was steering government economic policy. If what we read about Gordon Brown is true, he appears to be a very vain man, convinced of the power of his own intellect. As he was presiding over what appeared to be an economic boom, did it ever occur to him that the boom was built on a foundation of sand? I think that it probably did, but his own vanity would get in the way of accepting such an assessment. Instead of looking at the reality of the situation, it was far easier for him to convince himself that it was his sound judgement that was at the root of the 'economic success'.

Gordon Brown no doubt saw himself as an intellectual with power enough to shape the world around him. A wonderful illusion, but nevertheless an illusion. I have mentioned in a previous post that he may have intervened to prop up the house market. Was this part of an evil conspiracy? I think not, and am confident that he found self-justifications for what he did, outside of recognising that what he was doing was supporting an artificial boom. Undoubtedly fear of being 'found out' was the true motive, but people with such vanity are unlikely to accept their own fallibility.

Again, there were undoubtedly those who were questioning the wisdom of policies that were creating such apparent economic success. With international respect, acclaim, the respect of the press, and so forth, why would Gordon Brown want to hear the truth of what was really happening. After all, he could point to the numbers or to the economists (cheerleaders) that supported the view that all was going well. If the whole world says you are clever, capable, doing the right thing, then why would you not believe in your own brilliance. Until the last couple of months, people like myself (the cynics) were a minority (in my case a person with no power to influence, and saying things that nobody wanted to hear). Within government, do you think that any cynic's voice would be heard? After all, Gordon Brown had the charts and figures to show that all was going well. He could point to the holy grail of economics, growth in GDP.

The same can be said of the other western economic leaders, such as Alan Greenspan, who have presided over the recent boom. One and all, they believed they were 'masters of the universe', giants who (with their intellect) were guiding the world economy to success. As these leaders patted each other on the back, and offered their mutual admiration, they were steering the west into an economic black hole. The sad, and human, part of this is that they believed that they were in control, and that they convinced themselves of their own brilliance.

It would be nice to think that there was some conscious conspiracy behind the current mess, that there was some master plan, and that the situation has some purpose behind it. However, the reality is that the source of the mess is more prosaic. It does not lie with highly intelligent individuals making plans in smoked filled rooms. Instead it lies in the fallibility, weakness, personal ambition and vanity of very ordinary and foolish people.