Statesmen are anxious to place obstacles in the way of economic misfortune, to prevent the loss of work and manufacturing business. It is apparent to me that governments are more able to make an intervention now than 150 years ago, that electrical calculating machines and the development of political economy over many generations has made such actions more conceivable. Nevertheless, compared with those previous times, the political economy is as if Gordius had continued to bind his great knot, had twisted rope upon rope and only some new young Alexander might have the wit to perceive an answer. For the analyses that are made, even by the electric machines, are not as precise as those in engineering.
There are many dangers in the path of ministers who seek to untangle such a ροζιασμένον. Some actions have already been taken, some wise and some hazardous. In Great Britain interest rates have been reduced, increasing the supply of money and allowing banks to function in a less perilous battlefield than previously. The parties are competing to offer cuts in taxation; but how different are their various proposals!
Mr Cameron would favour businessmen. I have compassion for our manufacturers at this time; but in such times they must demonstrate their own persistence and resilience.
Mr Clegg would pursue his plans, revealed some two months ago. There would be retrenchment in government, taxes on the foolish and concessions for those poor families who continue to strive to provide bread and shelter in turbulent times. It is a just plan but inadequate.
The Queen's ghillie would also reduce taxes in some form. He would support his plan by increasing borrowing by the exchequer. He has, I hear, never studied political economy; it is apparent.
For increased borrowing by the government increases demand on the bankers, allowing interest rates to be raised once more and removing spare money from the pockets of householders and businesses.
There are further dangers to be considered by all nations. China would spend some £500,000 million pounds, I hear. Its people are a prudent people who have saved the money and it is in their banks, it is said. Other governments may increase spending rather than reducing taxes - as if each course is equivalent.
Reduction of taxes in the European nations, spending on railways and repair of earthquake devastated towns - it is as if all have forgotten the events of the last 12 months. Prices of fuel and metals have fallen with the reduction in demand and this may help to dampen the collapse of economic prospects. And yet once the Chinese dragon arises and spreads its wings, it will yet again demand steel and oil and coal. Once the British and the Americans have spare money in their pockets, they will yet again take to the air and the road.
Anyone who borrows money must seek a return on their borrowing. The government of China will borrow from its own people and create a better nation. The rest of the world will return to where it was: teetering on a financial precipice - unless that is, statesmen agree some wise investments for their borrowed monies.
For not only will borrowing increase the rates of interest but spending may increase the price of scarce commodities. It is therefore necessary that expenditure is directed towards those areas of investment where supply is plentiful, where working people can be employed without waste of resources. I hear a wise man in the past century once suggested that in such times it is best to employ the workforce to dig holes; there was greater wisdom in such a saying than mere jesting.
I would direct our statesmen to where resources are indeed plentiful and where investment can gainfully be made. For the mighty sun, the sky's glowing orb, continues to bestow unlimited fuel and energy upon us; and mankind now appears to have the skill, the techniques to place a harness on the chariot of Helios. Here is expenditure that will repay itself four-fold, if not ten-fold; it will stimulate new investment in new machines and reduce the hapless reliance that the northern nations have upon the desert oil wells of Arabia, Mesopotamia and Persia.
I have some hope that young President Obama will take steps in this direction; there are few grounds for confidence in Her Majesty's chief minister.
The fires are kindled, and the smokes ascend;
With hasty feasts they sacrifice, and pray,
To avert the dangers of the doubtful day.
WEG
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We are currently debating whether or not to give free money to the automobile industry, an industry singular in its tone-deafness to the realities in which it operates. I am quite pleased that, so far, it seems "not" is winning, at least for now. As there are other mechanisms the auto industry could use under our laws to save itself - most importantly restructuring of its debt and its manufacturing base through bankruptcy laws, particularly the so-called "Chapter 11" bankruptcy declaration - I think it prudent to prefer that solution to just giving them checks.
I think your reminder that China is seeking to reinvigorate its economy through a massive domestic stimulus package is important. Should the Chinese seek resources outside itself to fuel this particular bit of pump-priming - American steel, say, - it could go a long way toward benefiting the rest of the world.
Making moves toward energy independence are important, and currently the big exciting news in the US is wind-power. That won't help with the automobile industry, but it will certainly reduce our dependence on petroleum.
My own sense is that Pres.-elect Obama will probably do a combination of smart and stupid things once he takes office in January, including giving free money to Detroit, as well as help work on a domestic works program including infrastructure investment, a lowering of taxes on the middle class, as well as raising the rate on the highest tax bracket. As long as he does not make a fetish of fiscal restraint, at least in the near term, I think we may yet avoid the abyss over which we currently hand.
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