The way out

My Burning Ears:

I do hope that someone not utterly hare-brained has an idea how to get us out of our current one. Have the central banks actually been following some kind of long-term masterplan to that end, or have is what we’ve seen so far just a dance between periods of fire-fighting and spells of trying to gradually pull away from the fire-fighting without the steps necessarily belonging to some grander underlying scheme?

So far it’s been firefighting and hoping. Peeps keep trying to raise interest rates to get back to “normal” and the economy deflates again.

The problem is difficult.

The actual answer is economic growth. Well, yes, D’Oh. But the generation of that, well. Actually, this is an area where Ritchie is partly right. Monetary policy isn’t going to solve that problem. It can – and has – prevented deflation and thus negative growth. But actual growth?

Fiscal policy isn’t it either, although it can help. Reducing the UK tax burden to something like Singapore’s would help, certainly. And while I can dream no, that’s not a serious suggestion.

The other bit is government. Reduce the regulations preventing growth. The 1930s, for example, saw a housing led boom in the economy. But then back then it didn’t take 5 years to get from field to breaking ground with planning permission. REACH, as properly insisted upon, means you should pay up £250,000 for making even lab bench amounts of some new chemical to show that it’s not harmful. That slows down chemical research a bit, no? The entire economy is festooned with these restrictions that slow down economic growth.

One reason that it’s been computing – and online manifestations – that have been growing so much is that it’s all new. There are no regulations to stop you experimenting with whatever. You just can’t do that in any extant area of the economy.

The actual way out of the current slow growth and low interest rate world is laissez faire. Within the usual Common Law strictures of don’t kill the customers etc. But just leave markets and capitalism free to get on with experimenting.

8 comments on “The way out

  1. Just a comment, the REACH regulation is a bureaucratic and expensive nightmare but it only kicks in at production levels of 1 tonne and R&D is excluded from the regulation, so not quite as bad as you imply

  2. That was indeed so. But one full frontal confrontation with it (not in the UK) led to me being informed that the 1 tonne exemption no longer stood.

  3. Inflation and deflation are not prices going up and down. Inflation is the central bank pumping more money into the economy than GDP justifies, and deflation is not enough money.

    There’s also a long-standing belief that central bank interest rates — the repo rate in particular — are a kind of magical knob that can be twisted to control the economy. Interest rates should be set by the people who borrow and lend money, not top-down by someone in government without a dog in the fight. That’s what liberalism means.

  4. Inflation is the central bank pumping more money into the economy than GDP justifies, and deflation is not enough money.

    I used to think that, Southerner, but inflation is defined as a sustained rise of the price of goods and services.
    The term “inflation” describes a symptom not a cause.

    You are, of course, correct in describing the cause. Don’t know if there’s a specific term for that.

  5. Long, long ago I thought it wise to warn an undergraduate class that REACH was on the horizon. But there were as yet no regs to show them. So I showed them the cucumber and banana regs instead and said “REACH will doubtless be just as well-judged but probably less amusing”.

  6. Isn’t a big part of the solution to accept we are well due another recession and just get it bloody well done with?

    You can get interest rates back to “normality” after the recession because we know there is at least the last peak to grow back to. The alternative seems to be the entire developed world eternally stuck at <2% GDP growth, all of which is fuelled by immigration anyway.

    And if the recession is deflationary so be it. Those who get screwed over by being excessively indebted – well – you should have learned your lesson in 2008, and you are part of the problem so it's now your turn to become part of the solution. No bail outs this time because that just kicks the can down the road yet again.

  7. Only listen to experts…

    “Companies are responsible for collecting information on the properties and uses of the substances they manufacture or import above one tonne a year” ECHA 2019

    ‘dearime’ was very prescient. The REACH regulation consists of 141 Articles spread over 234 pages with 17 additional annexes spread over a further 615 pages
    ECHA has produced >5000 pages of additional guidance

  8. The actual way out of the current slow growth and low interest rate world is laissez faire. Within the usual Common Law strictures of don’t kill the customers etc. But just leave markets and capitalism free to get on with experimenting.

    +100

    The actual way out of the current slow growth is to also (or only as a start) bin & landfill the green crap

    @dearieme

    +1

    @BiG

    The alternative seems to be the entire developed world eternally stuck at <2% GDP growth

    Except US of A – we should learn from this

    EU: move a light switch – Danger, High Voltage; certified electrician required
    EU: install 12v light in garden – Danger, High Voltage; certified electrician required

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