Politics, Narcissists and the Modern Keynesian

We’ve just got some random thoughts today due to our inability to think clearly on any one topic. It seems like everywhere we turn, a sledgehammer of absurdity hits us right in the face.

Take the circus that is currently in town — national politics. What an embarrassment to the people of this country. As much as we try to ignore the situation, the political farce smears itself all over us. Slipper, Gillard, Abbot and all the rest of them…all completely unfit to represent this country.

On Lateline last night we watched host Tony Jones waste about 20 minutes of everyone’s time interviewing the world’s best treasurer, Wayne Swan. Swan ignored just about every question, his responses were an insult to Jones and the people WHO PAY THIS MAN’S WAGE — the Australian taxpayer.

Right then and there we thought of starting a political party called ‘Answer the Question’. We pictured ourselves in parliament (after presumably getting enough votes) interjecting into some long-winded non-answer by some windbag by standing up and saying, ‘excuse me ‘honourable’ member for blah (and we would do the quotation marks with our fingers too, as a mocking reference to the word honourable) could you please just answer the question?’

But we would never do it. For a start we’re too lazy. And the thought of expending all our energy on telling other people what to do via a political process makes us feel ill. Although strictly speaking the aim would be to just tell other people (politicians) to stop talking gibberish and do their job.

But we all know that’s not going to happen. Put simply, we have a bunch of narcissists (or a particularly disreputable bunch of narcissists) running the country, trying to mould society into something that befits their own view of the world.

It’s true that politics has never really been any different. But we doubt that politicians have ever shown so much disdain and disrespect for their office and for the people who vote them in and pay their wages. They are a disgrace and, if they had any shame, would be a-shamed. Clearly they don’t.

The best strategy for dealing with these narcissists is to ignore them completely. Don’t interview them, don’t mock them (The Chaser) don’t write about them (the Markets and Money) and don’t vote for them (everyone).

Enough said.

What else is going on?

Well, we think Shane Warne’s escaped from Madame Tussauds. See page 13 of today’s Australian Financial Review for the indisputable evidence. Where’s the real Warney? There are conflicting reports of him spending time in the nets in St Kilda, and approaching bayside walkers in Melbourne trying to flog his Brighton home for more than $10 million.

Okay, just one more thought on the deep bear market in Australia’s political stocks. It’s not just us. It’s a global phenomenon. Easy money leads to low standards. Anyone can get a loan and anyone can get into politics. Easy money tends to suspend the natural laws of the market, for whatever market it might be.

Dylan Grice, who spoke at our After America conference in March, recently sent us one of his Popular Delusions reports.

‘At its most fundamental level, economic activity is no more than an exchange between strangers. It depends, therefore, on a degree of trust between strangers. Since money is the agent of exchange, it is the agent of trust. Debasing money therefore debases trust. History is replete with Great Disorders in which social cohesion has been undermined by currency debasements. The multi-decade credit inflation can now be seen to have had similarly corrosive effects. Yet central banks continue down the same route. The writing I on the wall. Further debasement of money will cause further debasement of society. I fear a Great Disorder.’

A key element to social disorder is the lack of political leadership. By that we mean intelligent leaders who promote freedom of association, exchange, the rule of law, private property and all that sort of stuff. Not strong-arm fascist leaders who muscle their way into power because of the very lack of an intelligent leader in the first place.

Dylan also included a great quote from John Maynard Keynes, the bloke who has unfortunately lent his name to the policies of the absurd. Today’s Keynesian thinks you can spend (inflate) your way to prosperity. Here’s what the real Keynes thought, in 1921:

‘By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some … Those to whom the system brings windfalls … Become “profiteers” who are the object of the hatred … the process of wealth-getting degenerates into a gamble and a lottery … Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.’

If we asked Wayne Swan what he thought of that statement, we’re guessing he wouldn’t answer the question. That’s because modern day Keynesians don’t understand the original Keynesian. Which is just the start of their problems.

They just like to spend money to keep the economy ticking over. And they like central banks to lower interest rates to ‘spur demand’. Swan thinks Australia avoided the global crisis, largely because of his expert economic policies. But government spending, along with the China boom (itself a result of China’s attempts to avoid the crisis) simply delayed its arrival.

This is the big mistake modern Keynesians make. They think you can avoid a crisis by spending more. But it simply delays the inevitable adjustment. The longer the delay, the worse the adjustment will be.


Greg Canavan
for Markets and Money

From the Archives…

Derivatives as a Sponge
5-10-2012 – Greg Canavan

Don’t Teach Your Man to Fish
4-10-2012 – Nick Hubble

Three Phone Calls You Must Make Now
3-10-2012 – Nick Hubble

Beer and Tax in Retirement
2-10-2012 – Nick Hubble

Hard Times for Hard Rocks
1-10-2012 – Dan Denning

Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

Leave a Reply

9 Comments on "Politics, Narcissists and the Modern Keynesian"

Notify of
Sort by:   newest | oldest | most voted
David & Brigitte Bode
David & Brigitte Bode

Very disappointed that you chose to classify Tony Abbott in the same company as Gillard, Swan and Slipper.

zane zeehan
it is no use asking wayne swann any questions on economics whatsoever. he is totally clueless ( I was going to say brainless. ) in fact, if he wasn’t the treasurer of Australia I doubt he could even balance the books of the Toowoomba kindergarden’s annual Easter fete. look at some of the responses he has made to economic questions and you will see exactly what I mean. God help Australia. PS. yep, you guys and Jim Chanos are 100% right. When the Chinese economy finally implodes, the aftershocks are going to be truly earth-shattering. And the Euro is a… Read more »

It is disappointing, yes. But a fair call nonetheless…

David & Brigitte Bode
David & Brigitte Bode

Just how is it fair Koslo? Mr Abbott volunteers his services to many organisations including life savers and bush fire brigades also spending his own time assisting indigenous communities. Only in this country with its twisted left oriented press could he be dragged down to the same level as these scum.
To put Tony Abbott in the same company as lying vermin like Gillard, Swan and Slipper is insulting.

” Right then and there we thought of starting a political party called ‘Answer the Question’.” Greg that it pertains to a point I will make. As many people have pointed out, at the core of the crisis is a deficit of honesty. While people are in shock and horror at the scope of the globalised political and corporate landscape they forget to have courage and faith in one simple concept, the truth or personal honesty. With this in tact you have all the power you need to be great. If you have made friends with the truth then you… Read more »

I believe most people understand that they are being lied to. They take comfort in that as they know they will always have someone to blame and avoid personal responsibility for the mess about to ensue!

I recommend that all read Evan Thomas’ book The War Mongers (Roosevelt, Lodge, Hearst, and the Rush to Empire) and get acquainted with the Mugwhumps. Reed and the Mugwhumps were defeated because they were seen to be weak, and not of a US character that was predestined to act and to break out at its frontiers. Working the inside of that weak spot the jingoes turned an aspirational new world stage into a global empire stage and overturned one of the US founders most revered principles on sovereignty and self determination. In Australia we need to take heed of the… Read more »
Sounds unreal Ross. You are correct imo Ray but that is fine. There are some people in the crowd, they are in all races, classes and religions and even in the machine of empire itself, who are tiring of the lie. They are preparing for the truth. With much collaboration and with great labour an empire of lies will stand for a while. However the day comes when such an anomaly will find itself on the wrong side of history…and it will be crushed just when it appeared invincible. My own interpretation of history tells me not to get hung… Read more »
justin king

It’s easy to see that Abbott is an obnoxious,self-serving blowhard,but Greg is going a bit overboard on overall tone of this piece.It’s ALWAYS easy to pontificate on the human condition,but blasting it leaves a sour taste. // Ease-up and clarify.

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au