The New Deal is a Bad Old Deal

The comments below are an edited and abridged synopsis of an article by Alasdair Macleod

So far, the current economic situation, together with the response by major governments, compares with the run-in to the depression of the 1930s. Yet to come in the repetitious credit cycle is the collapse in financial asset values and a banking crisis.

The New Deal is a Bad Old Deal | BullionBuzz
Hands are making indecision signals

When the scale of the banking crisis is known, the scale of monetary inflation involved will become more obvious. But in the politics of it, President Trump is being set up as the equivalent of Herbert Hoover, and presumably Joe Biden will soon campaign as a latter-day Roosevelt. In Britain, Boris Johnson has already called for a modern ‘new deal,’ and his Chancellor is delivering it.

In the 1930s, prices fell, only offset by the dollar’s devaluation in January 1934. This time, monetary inflation knows no limit. The wealth destruction through monetary inflation will be an added burden to contend with compared to the situation ninety years ago.

Up for discussion: an introduction; the back story to the depression; the credit cycle and the banks; and money differences.

Conclusion: Governments are making the same mistakes they made ninety years ago. As was the case between 1930 and 1933, we can be almost certain of a banking crisis. This time it will be global, and will likely require banks to be taken into public ownership. The cost will be huge, and it will be paid for by inflationary means.

The scale of it means an unprecedented wealth destruction, hardly the basis for economic recovery. Statist preservation of existing production for fear of unemployment will hamper, not help, economic recovery. So long as fiat currencies retain any exchange value, there can be no economic revival. The most important difference from the 1930s is the money, which could collapse entirely. Of the economic consequences we can be certain; the political consequences can only be guessed.

Leave a Reply

Your email address will not be published. Required fields are marked *