Wednesday, July 21, 2010
“Confidence”: a deficit terrorist favourite.
The deficit versus austerity debate continues in the Financial Times this week. Niall Ferguson trots out a favourite deficit terrorist argument, the “confidence” argument. It runs thus (see in particular Ferguson’s last three paras).
The confidence of the population is damaged by deficits and national debts. Thus if the latter are reduced, confidence will increase, which in turn will get us out of the recession.
There is of course some logic here: logic which has a limitless number of hilarious applications. For example if the confidence of a football team is increased by the team painting their toenails pink, then pink nail varnish will certainly increase the team’s chances.
Now for the benefit of the hopefully very few readers who don’t know the name for this effect it’s called the
PLACEBO EFFECT !
It is a measure of the sheer ignorance and stupidity of deficit terrorists that they have to rely on something so utterly balmy as the placebo effect.
The medical profession (unfortunately) has to take the placebo effect into account when testing drugs. Reason is that while this effect is just a nuisance, the effect is definitely there: it cannot be ignored. But the vastly more important question is of course the chemical, biological and bacteria destroying effect of drugs.
It would be nice if those writing articles in the Financial Times were concerned about real economic effects rather than placebo effects.
Moreover, Niall Ferguson seems to be unaware of the REASON why the population is concerned about deficits and national debts. The actual reason is that they’ve been bombarded with a hundred million dollars of anti deficit propaganda paid for by the billionaire Peter G. Peterson and others.
A number of other trite anti-deficit arguments are put by Ferguson. One is that a selection of South American countries have gone over the top with deficits and suffered excess inflation as a result. Yes, the average mentally retarded ten year old knows that if one doubles the money supply every week a la Mugabwe the rampant inflation will ensue. Yawn yawn.
Also, while it is true that confidence is crucial in boosting commercial bank created money, it is precisely this form of money which balloons in the lead up to credit crunches, and the busts that inevitably follow. Far from basing an economy on “confidence” (or any other emotion come to that) it would be far better to base them on something more substantial. A currency based on gold is a possibility. Though gold has its drawbacks. Another more substantial form of currency is central bank created money.