Two Bald Men Fighting Over a Comb

As we blunder towards another credit crisis, with banks losing confidence in each other and increasingly refusing to accept each other's debt, the inability of politicians to act is extraordinary. This morning's headlines might have read: 'Lagarde says nothing, recommends doing something, not clear what'; 'Osborne demands strongly that something is done'. Tomorrow's headline should read 'Geithner insists on urgent (unspecified) action'.

Everybody is demanding action from everybody else, but all those who apparently have power have given it away and forgotten how to use what they have left. My Ten Point Stabilisation Plan is still available, free of charge, to any who would wish to use it. But while our politicians find themselves incapable of thinking their way around free markets we can expect more blundering and empty performances in the days to come.

While Tim Geithner appears to have no thoughtful content to contribute, the intervention by the US Treasury Secretary adds interest and takes hypocrisy to new heights. Geithner's advice will presumably be to cut public spending harder and faster, this coming from a country whose own debt is so out of control that it threatens to incapacitate the political system entirely.

Thinking back a while we can recall why the Euro was invented in the first place: because the Europeans were tired of the trade advantage the US enjoyed by controlling the world's trading currency. The Euro was intended to compete with this supremacy and become an alternative reserve and trading currency. The US's intervention is thus more evidence of its presumption in favour of its own interest, no matter what the consequences.

But it was no only the Europeans who had grown tired of producing goods for the US and receiving only arrogant pronouncements in return. The Chinese worked their way into such a massive external trade balance that they could buy up the US and have change. Hence their continuing and repeated calls for a neutral trading currency to replace the dollar and the euro. Meanwhile, the growing economies of Latin America and south-east Asia found ways to facilitate mutual trade without using the dollar. The US no longer has anything to support its assumption of a right to tell the rest of the world how to behave.

If this really is a situation of two bald men fighting over a comb it's fairly clear that the comb, like everything else these days, has been made in China, and the Chinese are holding on tight.
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