Gordon Brown has pledged to forge a "global new deal" with Barack Obama when he meets the new US President for talks in Washington. Gordon Brown's arrival in Washington masks a long-term decline in the Special Relationship. The Prime Minister said the two countries' historic "partnership of purpose" should be directed at fighting the downturn as well as terrorism, poverty and disease. Mr. Brown, who will be the first European leader to meet with Mr. Obama since he came to office, said: "I believe there is no challenge so great or so difficult that it cannot be overcome by America, Britain and the world working together. "That is why President Obama and I will discuss this week a global new deal, whose impact can stretch from the villages of Africa to reforming the financial institutions of London and New York – and giving security to the hard-working families in every country." It would require all continents to make cash injections to boost economies, all countries to adopt green policies, universal banking reforms and changes to international bodies, he suggested. Amid fears that the new US president may downgrade the importance of the "special relationship" between the two nations, Mr. Brown stressed his fondness for America in an article in the Sunday Times. – Telegraph
Dominant Social Theme: Let the adults handle it.
Free-Market Analysis: Oh, boy, we've been writing about it and predicting it – but here it comes. Two leaders, the UK's Gordon Brown – who is presiding over the slow-motion collapse of his economy and America's Barack Obama who‘s trying to launch a $3.5 trillion budget on the back of a quasi-depression – are going to save the world … together.
How are they going to perform this feat? You would think they'd figure out a way to slash government expenses through efficiencies of scale. Then they'd make a joint declaration about cutting taxes and finally they would pledge to reexamine the role that fiat money and central banking played in the world's economic collapse. But no, that does not seem to be the agenda. The two will discuss apparently a partnership of progress that includes fighting terrorism, poverty, disease and now economic depression. The talks will be pursued within a framework of a global new deal whose impact can stretch from the villages of Africa to reforming the financial institutions of London and New York – and giving security to the hard working families of every country.
Wow, that's some agenda. How would it be done? It would require all continents to make cash injections to boost economies, all countries to adopt green policies, universal banking reforms and changes to international bodies. OK – the financial collapse is to be combated by force-feeding a coordinated program of environmental regulations (carbon cap and trade?), by setting up a global financial police force to enforce Draconian financial regulations worldwide and by insisting on a harsh credit regime that banks will have to adopt, one that may further crush lending. Yet the economic downturn was sparked in large part by a central banking money bubble; none of the proposed reforms speak to re-examining the mechanism of central banking, let alone to re-evaluating its central place in the West's monetary galaxy.
Was the downturn caused by pollution of some sort? We must have missed it. Then there is the issue of regulation. There were not nearly as many financial regulations in the 1920s when the world went on an investment binge that resulted in a crash and a Depression. There were plenty of regulations in place in the 2000s when the world went on another binge. The common denominator it seems is not regulation. It is central banking.
The economic crisis was caused by too much money. You can literally freeze the private market with regulations, but when the printing presses rev up – and inevitably they will again – all those regs will go out the window. "A new age is here," people will cry. "The old rules do not apply." And changes will be made, regs will be watered down or ignored, and the bubble will swell once more. The only way to puncture these serial crises is to remove the cause – and the cause is central banking and the ability of central bankers to inflate the money supply. Honest money – asset linked or gold and silver themselves – is the guarantor of sound, sustainable currencies. Nothing much that Brown or Obama seem to be contemplating will have an invigorating effect on domestic or global economies, now or in the future.