John Locke on Freedom and Why Monetarism Ignores History
In today’s episode I cover John Locke’s thoughts on political control, the latest round of lockdowns and why The Fed seems to have ignored everything Japan learned about monetarism in 2002. At what point does it simply no loner work to keep printing money? What happens when unemployment rises at the same time as incomes are skyrocketing? What strange times we inhabit! In this episode we also explore some interesting stats from Wolf Richter on what we can expect in the post-covid ‘New Normal.’
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📍 Hey everybody. Jonathan Doyle with you. Once again. Welcome aboard. To the supply side podcast. Thanks for the pleasure of your company. Hope I can bring you some value today. One of my favorite speakers used to say that you don’t need a whole bunch of great ideas. To change your life. You just need one good idea that you’re actually prepared to use. So I’ve been imbibing a load of great ideas over this last sort of 18 month period. I.
Don’t think any of us would put our hands in the air and say how much we’ve enjoyed the insanity of COVID. But I guess there is a case to be made for extracting whatever. Good. Can be found in difficult circumstances. And at least for me, with my international travel, kneecapped kidnapped. If this cerated, if you will.
I’ve had a chance to do a great deal of reading and thinking and listening in this fascinating field of classical economics supply side and global macro. I wanted to start this short episode with a quote from the famous John Locke. Listen to this. This is from his second treaties in government. Listened, carefully says it is the natural right.
Of every person. That they should not be subject to the inconstant uncertain. Unknown arbitrary will of another man, John Locke, secondary TCM government. Listen, one more time. He says it is the natural right. Of every person that they should not be subject to the inconstant uncertain. Unknown. Arbitrary will of another man now. And I’ve got a global audience listening in.
But here in Australia, the the worst case management scenario. In terms of COVID and lockdowns has come from the state here of Victoria, which last week went into, I think it’s third snap locked down 6.6 million people confined. Essentially to house arrest. Because of a single infection, you can see that the approach here of course is eradication, which everybody with a brain.
Understands will not be happening with the novel Corona virus. We may get some reduction. We may get eventual immunity. We sure as hell I’m getting eradication, but that message hasn’t gotten through yet because 6.6 million people are effectively locked in their homes. Now on that topic. I want to share with you some fascinating stuff from one of my favorite.
Economics writers, Adam Creighton, and he’s riding today. And he’s pointing from a fascinating new report. Called COVID 19 and the political economy of mass hysteria. This comes from a bunch of researchers at universities in Spain. And if I’m correct in Peru, Who. Sorry in Chile and have written extensively on the political case for driving massive Steria for the purposes of political control.
Which of course brings us straight back to this John Locke quote. It is the natural right of every person that they should not be subject to the inconstant, how those lockdowns feeling friends in constant uncertain, unknown, and arbitrary, unpredictable, who knows what’s going to happen next? The arbitrary will of another man. So this is what we’re experiencing, of course, with many of the lockdowns.
But one of the quotes from this report is as follows politicians. Have incentive to overshoot the Mark in their responses to a threat. Because they are largely exempt from the risk of possible wrong decisions and the costs. Which they pass on to others. And I’ve been saying this. To my wife for a long time, I said that politicians.
Especially in this covert since have nothing to lose. So rather than, for us cabinet based parliamentary government, where senior politicians make decisions and take responsibility for their decisions. We have all of course been getting very used to this concept of trusting in the science.
So politicians as you’re well aware, often defray these difficult. Decisions to unelected public officials. And then simply when everything goes wrong, they just said we were following the science. Just remember that before Copernicus, everybody else was following the science too. The science that said that the sun orbits around the earth. So let’s remind ourselves that science is an iterative process where we learn as we go. It is not a complete metaphysical given. So we’re interesting moment in history where.
Scientism has become an effective religion. Of course. The high priest of culture become those public officials with a science mandate. And then a democratic processes become profoundly subverted when politicians avoid. Any form of personal responsibility by offloading these decisions to others? I think that’s an important point because it goes to the very essence.
Of what democracy’s all about or what it used to be about at one point another quote here, talking about our experience here in the Southern hemisphere, the quote is Australia and New Zealand have incurred costs are equivalent to a world war. And more than any other nation has fighting a pandemic that has killed not even 1000 people with a median age of the mid eighties, between them.
And this is widely seen as brilliant. I like that line. We’ve basically incurred the costs of a world war. For something that has killed. Only around a thousand people now know death is desirable of course, or good, but we have to remind ourselves that in a standard flu season these deaths would, of course be,
1,000 deaths would not be unusual. Jim, Ricards made an interesting point in his latest book. That part of. The problem with lockdowns, is it actually diminishes immunity? You see when we’re out there around each other, normal life pre COVID were actually exposed to a whole bunch of things. And that basically increases our immunity over time. Doesn’t it? Yeah. We’re exposed to so many things, but now being locked in our houses, many of us, at least our immunity has been affected. Fascinating that we’re trying to stay safe and healthy while simultaneously reducing our immunity.
Couple of other things. I’ve been following Wolf Richter who some of you would know. As a, Releases some great regular research and he’s quoting something today from the American enterprise Institute. And this is a study released on foot traffic in major us Metro areas based on phone GPS is pinging off phone towers. So it’s.
Basically a track of how many humans are out and about. In major metros in the us, that’s tracking the 40 largest. Metro areas in the U S and foot traffic is down somewhere between 71% or 38% of January 20, 20 levels. So New York is at 38% of January’s 2020 levels. LA is at 45%. I think the best was actually Kansas city. But you look at New York 38% of its previous foot traffic. And what a tragedy, because.
That is truly one of the great cities of the world and some way that we used to visit once or twice a year. And just great memories and, I don’t, James Altucher HSA was saying lately that he doesn’t think it’s ever coming back and it’s gonna be an interesting discussion. Now the reasons of course that the foot traffic’s down with COVID tourism’s down. Obviously San Francisco is running very low.
We used to love visiting there doing the Alcatraz tours, all that sort of stuff. So international tourism and domestic tourism is way down for San Fran are the key factors of course, working from home. This whole working from home phenomenon is still playing out. Interestingly shopping malls were not doing well. Pre COVID big department stores in huge amounts of trouble.
As e-commerce takes over. And interestingly, the other big effect on foot traffic is entertainment. People with movie theaters shut. People going out of the home, less for entertainment while streaming services kick in. So more entertainment’s taking place inside the home. So the question becomes a course. How much of this.
Is going to change when COVID eventually recedes. And Wolf Rick does take is that the tourism stuff will gradually return. It’ll take a long time. He thinks that the work from home phenomenon, different hybrid variations of that will continue. He thinks shopping malls won’t recover. Because e-commerce has become so effective and so powerful.
And entertainment won’t recover. Pre COVID because even the big studios now are releasing their content to streaming and bypassing theaters. So it’d be interesting to see how that resolves look. The last thing I want to finish on today. Is, I want more merge what I was talking about with George Gammon, his video from this morning.
And also a, an important speech from the governor of the bank of Japan. Going way back to 2002. So 19 years ago. And. What I learned from George Gavin this morning. Was that of course something you’re you would already be across but of unemployment. And if you look at the real unemployment, so he’s drawing this from shadow stats.
If you look at real unemployment. It’s. Skyrocketed. At the same time as income has increased, go work that out from a point of view of economics. Less people have employed. Are employed. People’s incomes have been increasing. Through what he had fame would George Gammon calls a STEMI checks?
So what sort of economic world or waters have we entered when unemployment is high, but incomes increasing. That world, very well is the world of MMT because the magical unicorn Tapper theory money. It’s just got no limits at the moment. So we’re now North of 20 trillion in global excess liquidity. Since COVID began.
Now the reason I want to mention that as we begin to finish is. The ultimate question, is. This is what got me into this space was. If you can just print money indefinitely. When does it eventually stop? Like at what point can you just not use that as a system? What are its inherent limitations. So I’ve been.
I’m powering through the last sections of Richard Duncan’s seminal text. The dollar crisis and here on page 219, he is quoting. A speech from the governor of the bank of Japan. Massaro hi army on July 24, 2002. And as many of Japan is the ultimate experiment in monetarism ride Japan. With the guys that really threw the money printing sink at a moribund economy in the hope that it would kickstart, but here’s a couple of points. The first point that the governor of the bank of Japan made 19 years ago is this.
The bank has conducted decisive, monetary easing, which is wait for it. Unprecedented. In the history of central banking, both at home and abroad or first point he’s honest. And he’s telling it like, it actually is going, you know what, everybody. We’ve just printed more money than anyone. Anyway. That was 2002.
And of course, if you had a time machine, he would realize that really when it comes to printing money, They was a bit of an amateur, really, because it’s just changed so much since then. But here is a couple of key points in this speech. He says it is extremely difficult. To revitalize Japan’s economy. Wait for it.
Solely by monetary easing. When it faces various structural. Problems one more time. It’s difficult to revitalize Japan’s economy. Solely by monetary easing. When it faces various structural problems. Now. Let’s summarize that let’s make that more accessible. Even. He’s basically saying that we’ve thrown more and more money at this. And we have not been able to revitalize it because there’s inherent.
Structural problems around productivity, perhaps. Because at the end of the day, wealth, isn’t just magically printed and you can’t create wealth through necessarily through inflational through stealing it from others. You create it through producing goods and services of value.
So way back, 19 years ago, we had the first absolute evidence of a central bank. Trying to throw money at an economy. And realizing that it didn’t work. It fundamentally. Did not work. Now I was listening to a meal colonoscopy and Jeff Snyder, their podcast making sense the other day, which I really like.
And he was quoting someone. I can’t get the exact quote and have to dig it out again, but basically made the point that, you know, science. Builds on itself, right? I The basis of the scientific method is that you keep building upon previous discoveries. So as Newton famously said, if I have seen further is because I’ve stood on the shoulders of giants.
Now you’d think that you’d look back at the Japanese experiment and say they responded to structural problems in the economy by printing vast amounts of money. And they’re telling us it didn’t work. So if you look at what’s happening in the U S now, so the stimulus package is what, 1.9 trillion. George Gammon showing us a course that unemployment’s rising while incomes are going stratospheric.
How are these not structural problems? And what’s their response to print more money to produce more stimulus. So it’s interesting that in science we learn from the past, I you got to hospital next week. They’re probably not using leeches. Interesting trivia that actually still do use leeches in hospitals. Believe it or not. My wife was a nurse many years ago.
But they’re probably not going to do that. They’re probably not. Going to provide no anesthetic, the scientific method taught them that that in medical science, for example, you could make things better by learning from the past. But here we are in 2021. Seemingly incapable of learning from the messages of the past and history itself.
So we are in interesting times and I desperately do not want to be a pessimist. I’m trying to constantly. Stop to smell the economic roses. But it’s a little bear and I’m curious, and I’d love you to post a comment. About where we’re truly heading. I just can’t see how in Duncan’s methodology. We’re not just in vast asset bubbles that.
Cannot be resolved. By printing more and more money, but that is what we are doing. Alright, let me know what you think. Please share this with a few people. Please make sure you hit subscribe. It’s been great to see the numbers. Growing every week, but wherever you’re listening to this, the supply side podcasts, Spotify, Google podcasts, Apple. If you could leave a rating, give it some stars and hit that subscribe button.
But you know what the biggest single 📍 thing you could do to help would be to grab this review, hearing it and post it on your social media feeds. I don’t use social media, unfortunately, you won’t find me on it, but if you are still using it, You can at least get some common sense out there. Two other people who may find it of interest. Okay. One more time. Remember that quote from the start, John Locke’s second treatise in government.
It is the natural right. Of every person that they should not be subject to the inconstant uncertain, unknown, arbitrary will of another man. And as we reject the lessons of history, Then the, what tends to happen is more and more control. All right. God bless you everybody please make sure you’ve subscribed my name’s jonathan doyle this has been the supply side podcast And i’m going to have another message for you very soon
President Biden’s Economic Policy is about to have significant ramifications for the US and global economy. Here’s 7 key points to consider.
President Biden’s Economic Policy is about to have significant ramifications for the US and global economy. Here’s 7 key points to consider.