Kyenes easy man

I write as a great admirer of your journalism, and seemingly encyclopaedic knowledge of automotive matters. So it was with some disappointment and mystification that, turning to same, this Sunday morning, I notice that you have strayed into the perilous waters of pontificating about economics. The expression “jump start the economy” is devoid of meaning. The current situation is the result of 65 years´ of excessive credit creation by central banks, encouraged by politicians, of fiat currency. (That is, paper not backed by any real asset.) This has resulted in decades of malinvestment, not least in the motor industry. The situation cannot be “jump started” (read: “let´s have more of the same fools´ paradise”), but must be unwound by an equal and opposite balancing contraction of credit. It follows that your analogy between driving a reliable older car and keeping money under a mattress is....well, fatuous, frankly. The more successful it is, the greater the prolongation of the malinvestment. Your point about the scrappage scheme not costing taxpayers anything also fails. VAT is...well..a tax, isn´t it? And naturally, the scheme will require the usual armies of bureaucrats, building their unfunded, final salary, index-linked pensions. Obviously I could go on (and on). But could I limit myself to suggesting you stick to what you know?

Asked on 12 September 2009 by

Answered by Honest John
For the past 35 years in my simplistic way (and ignoring the morally reprehensible behaviour of investment bankers) I too have thought that an economic system based solely on the rising value of property was unsustainable. That’s where sub-prime mortgages came from. Property values rose too high for ordinary people to either own or rent property. Since those people (throughout the world) provide cheap labour, their income levels could not increase. So instead, in the USA and Europe, they were loaned huge mortgages they could never pay back in order to shore up property values from the bottom. When they couldn’t pay, the whole pile of cards started to collapse, and that’s why we are in the mess we were in. However, we are in an industrial age and cannot go back to an agro-based economy without culling 90% of the world’s population. So we have to make things and have to sell things. And Darling’s clever ruse of giving £1,000 with one hand, then taking it back with the other, was actually helping to jump start the economy before pig flu got in the way. Stuffing mattresses with money, or running ancient cars held together with bits of wire and string does not help the economy, as cave men found when one of them invented the wheel. (‘Who Runs Britain?’ by Robert Preston is useful reading.)
Dear Honest John,

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