The Financial Furry Freak Brothers
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When the gold standard was abandoned and fiat money became the only game in town, the economy may have been set up to take a huge fall. Can human beings really be so bold as to think they can control the value and worth of a country’s money?
When Albert Hofmann — the Swiss chemist who discovered LSD — passed away at the start of this month, newspaper editors the world over reported it as the death of the man “who experienced the first ever bad trip.”
But Hofmann’s hallucinations seem little worse than most acid-induced visions. Or so people tell us…
“Beginning dizziness,” he wrote in his lab journal for 19 April 1943. Looking to find a stimulant for the circulatory and respiratory systems, he’d just concocted — and taken — a big dose of lysergic acid diethylamide-25.
“Feeling of anxiety,” he noted, before adding in due course “Difficulty in concentration. Visual disturbances. Desire to laugh.”
Finally, Hofmann scrawled the words “most severe crisis” and fled the lab on his bicycle. It seemed to stay stationary even as it wheeled him back home, where his neighbor — who brought him a nice glass of milk to calm him down — appeared as a witch in a colored mask.
He felt possessed by demons. The furniture in his bedroom began to menace him. All pretty run of the mill stuff if you dabble with psychotropics, in short.
But such “fantastic images” don’t always ease into the sensations of “good fortune and gratitude” Hofmann got to enjoy later that day. Hallucinations can still cause the “most severe crisis” — even without some fool laying Witches Hat by the Incredible String Band on the turntable.
“Inflation will return to the two percent target,” claimed Mervyn King, head of the Bank of England, and one half of the financial furry freak brothers running Anglo-American monetary policy.
“Growth will eventually recover to a sustainable rate.”
Just a central banker’s wide-eyed hallucination? Maybe not. Like Albert Hofmann’s wobbly bike-ride six decades ago, the credit cycle will get us home in good time, ready to turn once again from boom to bubble to bust. But like any powerful psychedelic, the trip gobbled down by Western investors could last much longer than anyone dares hope right now.
And just what was the Governor smoking when he claimed, “In these [current] circumstances, the household saving rate is likely to rise…”?
The Bank of England has been cutting U.K. interest rates since December. Its latest Inflation Report says it will continue to cut interest rates “in line with [bond] market expectations,” too.
And U.K. households have grown their savings only once when interest rates fell in the last four-and-half decades. That brief period lasted for two years at the start of the 1990s.
Both before and since — and most markedly during the previous post-war recessions (of 1974 and 1981) — people have tweaked their savings almost precisely in line with changes to the rate of interest, as set by the Bank of England itself.
King’s starry-eyed vision, however, “is part of a rebalancing of the U.K. economy, away from spending and importing, toward saving and exporting,” he told reporters last week.
The sky’s turned all purple in Washington too if U.S. policy-makers think the credit crunch will somehow boost household savings there.
Put another way, “who had heard of collateralized debt obligations just 10 years ago?” as Niall Ferguson, history professor at Harvard, asked in a speech opening New York’s new Museum of Finance back in January this year.
“Collateralized loan obligations? Credit derivatives? These forms of financial instrument are of very recent origin. So are the hedge funds; so are the private equity partnerships; so are the sovereign wealth funds; and so are those wonderfully named entities, the conduits…”
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Closed to New Investors for the Last Six Years — Now Open Again…
The “Chaffee Royalty Program” That Turned Every $1 Into $50
In 2002, the same royalty “paycheck program” that paid out $50 for every $1 invested… decided to shut the door to new “members.”
In 2008, that door is open again…and it just got easier than ever to “make money while you sleep”…
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