by Tarquin O’Flaherty
The calculated financial lunacy initiated at the Chicago School of Economics and eagerly taken up by Western leaders, has brought the US and most of Western Europe to their collective economic knees. The results of these much vaunted economic manoeuvres has been nothing short of catastrophic. Our present economic stagnation, unemployment and soup kitchens are the direct result of sound advice offered to us by the Nobel Prize winning Austrian economist Friedrich August Von Hayek, together with those of fellow economist Milton Friedman (who introduced Hayek to Margaret Thatcher) and one or two other of Austria and Chicago’s brightest minds. The result of all of this dizzyingly cerebral economic calculation, thirty years later, is available for all to see.
Spanish poet, philosopher and novelist, George Santayana famously once said that ‘…those who cannot remember the past are doomed to repeat it…’
Simply put, the 1929 crash happened because a vast conflict of interest arose when both lending and investing went on under the same banking roof. American President, Franklin D. Roosevelt, in the wake of the crash, brought in the Glass-Steagall Act which forbade this practise. Banks, thereafter, could do one or the other, but not both. Outraged, investment houses and banks, like rats round a cheese barrel, have been gnawing away at this restriction ever since. By the time U.S. President Clinton revoked the Glass-Steagall Act in 1999 it had become a relatively emasculated piece of legislation. Nevertheless it still remained an irritatingly sufficient deterrent to those on the wilder shores of financial speculation. With its removal and within a relatively short space of time, the cat was out of the bag and the economic lunatics out of the asylum.
Despite the horrifying example of 1929 and the consequent Depression, in the last few years the practise of lending and investing, once more allowable beneath the same banking roof, is once more producing the same dire consequences. Meanwhile, the meretricious have had a field day doing precisely what they did in the 1920s. Creating worthless stocks and bonds (and derivatives), talking them up and then selling them again and again until, inevitably, confidence in these ‘stocks’ fails, the scam is discovered and the whole box and dice falls on its face. When the orgy was over and reality returned, the West was bankrupt and some of the greatest modern banking institutions had gone to the wall.
Despite banking propaganda to the contrary, the vast majority of American banks were involved in this predatory practice and only survived because they were bailed out by the U.S. government.
A lot of what I’ve just written is old news now, but I thought it worthwhile to trawl through it in order to point out out one or two interesting facts. Following the Wall Street crash of 1929 at least 400 banks collapsed. From their ivory towers, disgraced speculators, banking magnates and sundry other establishment pillars were defenestrating themselves in droves.
To be continued – tomorrow