Saturday, December 09, 2006

Another French Socialist Shows His Economic Ignorance

Didier Migaud, the French equivalent of a congressman and former budget official, objects to the recent European Central Bank decision to increase interest rates.

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[Thanks to chucknado.typepad.com for the photo.]

On the face of things, I kind of agree that the central banks of this world would do better to leave interest rates alone and abandon the idea of a joy-stick "Monetary Policy." (See my previous post.) What they are doing is point-blank intervening in the money markets.

But you can't have one-sided intervention unless you want things to get out of hand. What balloons up, must shrink down. A loosening of central bank interest rates and of the credit faucet must perforce be countered by a subsequent recuperative squeezing of the said rates and credit availability.

Like most living creatures, Monsieur Migaud only gripes when the medicine becomes bitter to his own taste. As long as the credit pumps are working in his favor, he says nothing; as soon as the proverbial punchbowl is retired, he starts to gripe.

But both manipulators and manipulatees are hypocritical here. If the governments and central banks of the world want to treat market participants and their elected representatives as children, then they should give them a tap on the butt, tell them to sit down, and explain to them that you can't binge on rum punch all day long, that at some point you have to return to common sense and submit to the hangover.

Mr. Migaud has at least the excuse that he is acting according to his socialist beliefs, which say that Big Government must be a father to this irresponsible albeit permissive society. The hitch is that the concept of good governmental parenting is a counterproductive delusion, and one that will only hasten the spoiled and immature adolescents toward their own self-destruction. (Oof. That egg was hard to lay.)

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