Time to Buy Gold

Once upon a time I was taught by Danny Blanchflower. No, I have never played football, I'm talking about the economist of that name - well his name is really David Blanchflower but he told us that only his mother still calls him that. He was moonlighting from his day job at the University of Guildford to teach we humble Open University students.

He was ambitious and found himself a job at an Ivy League College in the States. Some time spent on the other side of the Atlantic is an essential stepping stone to a successful career as an economist, and membership of the Monetary Policy Committee a proof that you have arrived. So Blanchflower is an entirely pukka economist - the fact that he has published his latest tirade against spending cuts in the New Statesman is more an indication of the pusillanimous behaviour by the mainstream media than that he is a radical outsider.

What Blanchflower is trying to say, or scream, is that the recession is not over. If you look at the figures this is clear. Just look at the one graph that I've included with this post. It plots a comparison between the Baltic Dry Index and the price of gold. The first is a direct measure of how much stuff is trekking around the world; the second a measure of investor fear. When the shit really hits the fan you should put all your spare money into gold (I won't charge you for that nugget of advice since I know that if you read this blog you don't have any spare money!).

Of course I also agree whole-heartedly with Blanchflower's critiques of the economics profession. I remember him as a fairly conservative person, who thought I was a crazed hippy, but he did ring alarm bells about the house-price boom and he did call for cuts in interest rates long before his fellows on the MPC - and at a time when they might have made a difference.

He thought I was naive, but I would like to repay the compliment. Is it not rather naive to expect economics professors and politicians to come out and criticise an economic system that is deliberately constructed to suit their interests? And even more so to think that either party will give a damn about youth unemployment and the psychological pain caused to a 'lost generation'?

The meeting of the G20 in Pittsburgh was apparently intended to address the imbalances and distortions in the world economy. But the vision does not seem to extend beyond talking about limiting the bonuses of bank executives and the media is dominated by headlines about Iran. In one sense this is not so illogical: another foreign war would boost economic activity for certain sectors and might well put some of our young people back to work - and remove others permanently from the risk of unemployment.

But genuine attempts to address the causes of the economic crisis are either not being made or not being reported. The elite leaders of global capitalism are still seeing their role as trying to persuade us that all is fine and we should just carry on shopping as usual. I wish Danny well in his attempt to appeal to a more democratic tradition, where we still felt our power might be expressed through the ballot-box rather than the credit card.