17 March, 2020

“At the recurrent end of the unending”

“And the end of all our exploring

Will be to arrive where we started

And know the place for the first time.”

T.S. Eliot “Little Gidding III”

Where to start? It appears that within the space of a few short weeks we have decided to surrender entirely our economy and our liberty and place our welfare in the hands of those who know best. We have – without so much as a whisper or a protest – collectively decided that the highest value in our society is the defeat of a virus, at all and any cost. Only we haven’t decided – that decision has been made for us and the consequences of it are ours to bear. Possibly for the next generation.

Remind me: when we did collectively decide to abdicate control over our lives and liberty? When did we explicitly make the trade that combatting the COVID-19 virus was the single most important focus of our civil society and that all other freedoms – those concerning our right to move and congregate, to transact and create value, to decide for ourselves how we evaluate risks and how best to confront and mitigate them – must necessarily be forfeited in the battle against this sinister microbe? We didn’t. This decision has been made for us and by tacitly putting the containment and elimination of this disease ahead of all other values in our society, we have collectively agreed to remove the ability of tens of millions of citizens to pursue their livelihoods, to shut down our economies, to quarantine the entire citizenry and to transfer the working population (that was not already dependent on the state for its monthly income) directly or indirectly to social welfare and therefore state control. And all of that since 1st March, not 20 days since.

Ronnie Stoefele of Incrementum (@RonStoefele) wrote in a thoughtful Twitter thread last night: “I am not scared of COVID-19 but rather the disastrous consequences for businesses, capital markets and employees..” I don’t think he means disastrous consequences due to the disease itself, but disastrous consequences deriving from governments collective and co-ordinated reactions to the disease. Within three weeks we have abandoned freedom of movement, freedom to assemble, freedom to pursue our trades, freedom to create value, freedom to make basic choices around the risks we wish to take and the solutions we pursue to mitigate and combat them. We have seen borders re-erected along purely national lines to “protect each other” from foreigners – as if stopping Germans travelling to Strasbourg was going to make the blindest bit of difference to the disease’s passage.

We have decided collectively – or had the decision thrust upon us – that, at the flick of a switch – our entire economic system should now be operated on a social welfare model, and that the “government” has now been mandated to provide liquidity to all citizens and businesses that require it in these “unprecedented times”. How convenient that at the very moment that the unsustainable debt-financed faux-prosperity model that consecutive governments have been pursuing for the best part of 50 years (I would argue that they have been pursuing the same deeply flawed economic policies since 1929, but that is for another post) was about to collapse under the weight of its own contradictions and expose the irresponsible, liberty-crushing, self-righteous and relentless path towards technocratic socialism under the guise of “free market” crapitalism for what it is – a bankrupt, morally dishonest perversion of liberty – an invisible enemy should appear that necessitates the takeover and imminent closure of the very markets against whom the technocrats would at some stage had to have admitted defeat.

That our debt-financed society was at some stage going to run out of runway has been obvious to more than a handful of observers for years. That our model of borrowing to finance consumption and punishing saving was undermining the ethical fabric of our free market social order has been observable for decades as social cohesion decays and the distribution of wealth and prosperity is grotesquely skewed towards the asset-owning minority. That the gradual cancerous intrusion of the nanny state into every nook and cranny of our activities is crushing private initiative and disadvantaging the small business in favour of the lobby protected larger enterprises is not a new phenomenon and that governments, now fully dependent on the heroin of interest free credit, would fight tooth and nail against the inexorable day of reckoning was also to be expected. But this!

I have been expecting this day of reckoning for some time and am surprised only at the tenacity and creativity of the treasuries and reserve bankers to extend that moment by accelerating the process of monetary basement and manipulating every market that they need to to keep the show on the road. But this. The wholescale takeover of the economic and financial apparatus of the country under the guise of battling an overwhelming enemy and using the vocabulary of war to justify unheard of measures to direct and control the citizenry goes beyond anything I thought would be either possible or justifiable in our western societies.

There is no denying however that the Great Deleveraging has now begun and that the real battle that we are fighting is not against a microbe but for a way of life. This battle was always going to be political, because at the core of it is the question of the role of government in our society, the role of the market to allocate resources properly and without interference and the nature of individual liberty and the right to make our own decisions and to manage our risks as we see fit. By massively muddying the waters through the declaration of a global state of emergency and effectively nationalising the economies (or what do you think the effect of just one month’s lock down is going to be on the solvency of most businesses and households?) and creating dependancy on the credit spigot for survival, over-indebted states around the world are seeking to avoid this vital discussion and do what they do best: avoid tough questions, maintain a panglossian view of the world and kick the can of consequences down the road a little bit further.

My guess is that stock markets will be shut down this week or next, banks and financial institutions “too big to fail” will eventually be all but nationalised, government debt and reserve bank balance sheets (is there even a difference between them any more?) will balloon to proportions we would have considered impossible only a month ago, the armed forces will be brought in to “help manage” the situation and ensure an “orderly distribution of vital resources” (food, medicine etc) and to enforce the curfews and we will wake up one day to find that nothing is as we thought it to be and that what we thought was fixed and immutable has given way to what we would never have agreed to had we been asked.

To quote Lilly Tomlin (thank you Tim Price for this) “Things will get worse, before they get worse.” and as they do, those who care for constitutional liberties, freedom, the right to trade and prosper and who hold a quietly sceptical view about the infallibility of any institution, no matter how well-meaning its intention, would do well to understand that this is above all a political battle not a health care one. I started this year as a free-market conservative and am rapidly being radicalised into a full-blown libertarian as I see how easily we are handing over the keys to our liberty and our prosperity. God help us.

I will end by quoting another thoughtful and intelligent commentator from the indefatigable FinTwit community, Caitlin Long (@CaitlinLong) who on a long thread on Saturday wrote:

“But realise life doesn’t end in these situations which are restructurings during which the control of the factors of production move from weak hands to strong hands – from the destroyers of capital to the hands of producers of capital. That is a necessary outcome. Sounds scary & it is. I am not saying this is the end of credit system – just laying out that possibility. The cost of re-inflating the system once again = a lot more than $10 trillion of stimulus this time, imho – & even if it works the cost will only be bigger next time…..

If you are willing to read history to understand all this + take the time to educate yourself about the alternatives, you’ll feel better. These situations favour those who embrace change & ignore the advice those stuck in the old paradigm. Huge opportunities are already opening up! Take care of your loved ones & your neighbours & stay safe out there folks!.”