Monday 19 September 2011
I blame John Maynard Keynes (JMK)
Ever since the Great Depression and JMK’s ‘The General Theory of Employment, Interest and Money (1936)', have we had more intense government interference and hence taxation in most advanced economies. Thank you JMK.
But seriously, how much is too much? There must be value in controlling fiscal policy, monetary policy and (social) employment policy, but is this being done in an integrated fashion and with ‘value maximising’ principles?
We at theMarketSoul Limited believe this not to be the case.
We prefer to take a leaf out of Joseph Schumpeter’s book and view the economic cycle as either short (1 – 2 years), medium (around a decade) and long-term (many decades).
The trouble with any form of economic analysis is that taking any temperature readings during any specific cycle is just that – A temperature reading. Meaningless without being set in its proper context. We generally have a major problem in identifying where we are in any given long-term cycle.
It is only with hindsight and the historical perspective that we can truly determine where we were and where we thought we were heading.
It is our belief that we are (still) in the midst of a major paradigm shift, triggered by the innovation wave of the ICT revolution over the last 20 years.
We still have not fully grasped the consequences and full extent of this ‘drift’ to a new equilibrium.
As one of the unintended consequences we are currently facing up to a sovereign Debt balloon and are desperately trying to determine when we will encounter ‘Peak Debt’.
One of the popular libertarian ideals is to cut government’s stake as a percentage of total output of GDP. We endorse this view, but it appears that at the end of the day (because we have forgotten what Laissez faire looks like); we’ll still need someone to keep the lights on, adjust the interest rates and collect our taxes. All this in the name of job creation…