The Coming Tide of Protectionism

Fast forward 70 years and we find ourselves on the precipice of the exact same scenario. Apart from death and taxes, one certainty we can always rely on is the blatant stupidity of the political elite that is as unshakeable as gravity itself. My crystal ball tells me our brilliant economic and political leaders are going to embark on a path that can be distinctly divided into two phases.

On a fiscal front, the depressionary octopus will face combined might of every central bank cannon, blasting bags of currency from every corner of the earth. While “shock and awe campaign” continues with this massive global aerial strike, strategically positioned infantry in the form of global investment banks (JPM et al) will manage hyperinflationary consequences (gold) in the derivatives market, hence silencing any alarms while the other battalion of infantry, namely, the financial media, will continually bombard the airwaves with endless happy faced presenters singing Yazoo’s hit track “The only way is up”.

How long this current phase lasts is anyone' s guess. It will not work and catapult us into a new Aquarian age ... it is doomed to failure by its flawed logic. You cannot douse a fire fueled by excesses by adding more excesses.

I eloquently entitle phase 2 “Every man for himself and @#$% the rest”. This is when the real action will begin. This is when politicians the world over will abandon the global love boat in order to save their respective hides where it matters ... back home.

This phase will be characterized by the introduction of a wide range of domestic policies drafted to close borders, and put in air filtration systems to keep out the global depressionary rot from further infecting their respective capitals. This scenario explains an issue that has turned logic on its head and perplexed me for the last few months ... the spectacular rise of the dollar. If the U.S. represents the bulk of a combined global economy, just imagine its stature when all countries stand only by themselves.

Furthermore the desperate times that characterize this phase mean that people and countries do increasingly desperate things to survive. Hence having a gigantic infallible military during such times will be worth its weight in gold. Could the really smart people see what ordinary me is and buy the dollar ... after all, better the devil you know than the one you don’t.

This will also go some way in explaining the euro's dismal performance of late. I don’t buy the economic stories currently being punted for its demise. I think they are fundamentally political rather than economic. If this phase does come to pass, do you honestly believe France and Germany are going continue supporting a currency that in effect is supporting all of their poorer Eastern and Mediterranean neighbors? Historically there is no love lost between this collection of usual suspects, most of whom were slaughtering one another a mere 200 years ago. I think the euro is doomed.

Anyone can criticize as I am now and this essay will be like hundreds of others written by permabears on a daily basis quoting gluttony of gloomy economic figures. But I do offer a solution, it’s not pretty and promises much initial pain and turmoil and it will be along these lines. Thanks to the Internet and various such advances we currently take for granted, the world and society at large are a vastly different place from that a mere 25 years ago. Our cultures, values and aspirations are to a large degree common and intertwined.

Firstly I would let all the weak companies, currencies, etc die. If this was done years ago instead of propping them up thanks to Greenspan’s easy money, this would be a much easier task now. Recessions and depression are vital to long term world economic health because it purges the weak before they get infectious. Secondly I will open up the doors of Europe and the U.S. to highly qualified people from anywhere on the planet. These professionals and businessman will mop up sub primes properties, add intellectual value to corporates and provide much needed jobs via start up businesses. Thirdly I will revert all currencies to the gold standard to ensure that excesses never occur unabated in the system again.

So there you have it, Dinen’s global solution ... now go and give it to the powers that be so that a difference can be made before it’s too late!