TJ, in the 1970s and 1980s, I experienced up close and personal the resolution of runaway government spending and fiat money shredding. I was ready for it in the 1960s because as a youngster I had first discovered interest on money, and taken an interest in how money works, and then the facts behind "Promise to pay on demand the sum of ten shillings" as written on a ten shilling note, and then this thing called "inflation" and then the magic of detaching money from the "promise to pay" which was gold and silver, to "In God We Trust" though in New Zealand we did not use those words.
It was "In Gold We Trust", then they made it "In God We Trust" [a subtle but important change] which really means "Let's Hope Big Ben Doesn't Blow It".
Then, in the 1970s, I learned about devaluation [in big chunks overnight of 5%, 10% and I think even 15% once or twice] of the fixed NZ$. Meanwhile, capital controls were standard and one had to apply to the government to take money out of New Zealand.
Inflation became the dominant lesson through the 1970s and 1980s, but at the end of the 1980s [October 1987 precisely] everyone learned about financial implosion and how debt could explode and share prices go down a very long way, beyond the event horizon into a singularity and black hole of zero size.
Then I learned about bank bailouts and taxpayer money going to preferred people. BNZ got what was then a huge amount of loot. Here is some BNZ history, with computers and internet thrown in for interest to show how far things have come how quickly.
1966: First computer purchased an IBM 360/30 with a 16k memory; Databank Systems Ltd setup in 1967 with the National Bank of New Zealand; the other three trading banks join in 1968.1978: Visa debit card introduced.1980: Visa credit cards introduced.1984: BNZ Centre completed on Willis Street, Wellington1985: Eftpos introduced through petrol stations in a pilot program.1987: Bank floated on sharemarket with a 15% stock offering.1989: Government reduces its share to 51% by selling 34%; with 30% sold to Capital Markets Ltd, and the remainder to the general public1990: Government bail out of $380 million to avoid collapse1992: BNZ purchased by National Australia Bank Group, First call centre opened in Auckland1998: Head office moves to Auckland.1999: BNZ launched Internet Banking.
While New Zealand is very backward in many respects, in other ways it leads the pack. We have already experienced all that's coming. Fortunately for NZ, there was an externality [the rest of the world], so the implosion was not really too dramatic, but those who committed suicide and otherwise suffered post traumatic stress syndrome would disagree. When the USA/Europe/Japan go belly up, there is not really much an externality to lean on. At present they are leaning on the NZ$ which is unsustainably high, but leaning the world on such a flimsy interest rate and financial foundation is not going to work out.
You can expect Big Ben and the USA government to do as in NZ in the 1970s and 1980s = QE II, III, IV, V. 10% dilution and more on a regular basis certainly takes care of a lot of debt. Being a borrower, or a lender, can lead to grievous bodily harm.
For a while I was accused of being Mr Bring Back the Gold Standard [by my BP Oil colleagues in the early 1980s]. I have since moved on and gold is not [and wasn't really then] what I was wanting, though at that time I had not formulated a plan. Many people have gold as their default setting for "What happens next, during and after the interregnum".
Meanwhile, including an actual interregnum, some English history.... [I asked Google about QE III, IV, King Charles I, II, King William I, II, ] Charles I (19 November 1600 – 30 January 1649) was King of England, King of Scotland, and King of Ireland from 27 March 1625 until his execution in 1649. Charles engaged in a struggle for power with the Parliament of England, attempting to obtain royal revenue whilst Parliament sought to curb his Royal prerogative which Charles believed was divinely ordained. Many of his English subjects opposed his actions, in particular his interference in the English and Scottish churches and the levying of taxes without parliamentary consent, because they saw them as those of a tyrannical absolute monarch. [1]
Charles's reign was also characterised by religious conflicts. His failure to successfully aid Protestant forces during the Thirty Years' War, coupled with the fact that he married a Roman Catholic princess, [2] [3] generated deep mistrust concerning the king's dogma. Charles further allied himself with controversial ecclesiastic figures, such as Richard Montagu and William Laud, whom Charles appointed Archbishop of Canterbury. Many of Charles's subjects felt this brought the Church of England too close to the Roman Catholic Church. Charles's later attempts to force religious reforms upon Scotland led to the Bishops' Wars, strengthened the position of the English and Scottish parliaments and helped precipitate his own downfall.
Charles's last years were marked by the English Civil War, in which he fought the forces of the English and Scottish parliaments, which challenged his attempts to overrule and negate parliamentary authority, whilst simultaneously using his position as head of the English Church to pursue religious policies which generated the antipathy of reformed groups such as the Puritans. Charles was defeated in the First Civil War (1642–45), after which Parliament expected him to accept its demands for a constitutional monarchy. He instead remained defiant by attempting to forge an alliance with Scotland and escaping to the Isle of Wight. This provoked the Second Civil War (1648–49) and a second defeat for Charles, who was subsequently captured, tried, convicted, and executed for high treason. The monarchy was then abolished and a republic called the Commonwealth of England, also referred to as the Cromwellian Interregnum, was declared. Charles's son, Charles II, who dated his accession from the death of his father, did not take up the reins of government until the restoration of the monarchy in 1660. [1]
No doubt such fun and games will happen again, possibly sooner rather than later.
Mqurice [suffering English "summer" following south of France idyll] |
