Saville on the Big Differences ‘This Time’

Steve Saville has an interesting blog post about…

The big differences this time

The post centers around the COVID-19 pandemic vs. the well known Spanish Flu of 1918 and the less well known Asian Flu of 1958. Specifically, it focuses on monetary policy in the absence of a gold standard – under which those two pandemics took place – and the difference in policy response as enabled by a completely unchecked financial system (funny munny from thin air).

Under the magic of Keynesian monetary policy, where the debt is ever-expanding, the response has been to shutter the economy, print the funny munny and dole it out to the people. Steve makes the point that the government no longer pretends to care about the debt because it doesn’t have to. Or at least it won’t have to until the real inflation shows up in 2021.

Short-term gain: magical pandemic response without commensurate consequences.

Long-term impairment: out of control inflation as these chickens get out of the barn but later come home to roost.

Here’s some of the post. Check out the rest linked above.

The third difference is linked to the first difference, that is, to the ability to create an unlimited amount of money out of nothing. This ability has existed for almost half a century, but 2020 is the first time it has been used by the government to provide money directly to the public. Prior to this year it was used exclusively by the central bank to manipulate interest rates and prop-up prices in financial markets. A consequence WILL be much more traditional “inflation” next year than has occurred at any time over the past decade.

The fourth and final difference that I’ll mention today is also linked to the money-creation power. It is that in 2020 some developed-world governments, most notably the US government, have stopped pretending to be concerned about their own indebtedness. Previously they made noises about prudently managing deficits and debts, as if the debt eventually would have to be repaid. However, this year they have tacitly acknowledged the reality that there has never been any intention to pay off the debt, and, therefore, that the debt can expand ad infinitum.