Throughout the financial crisis, The Telegraph’s Ambrose Evans-Pritchard has been a must-read on both sides of the Atlantic.
He’s frequently alarmist — which is a huge part of his appeal — but his assessment of emerging risks, especially in Europe, have been spot on.
And though the Telegraph is a conservative paper, and Pritchard is himself very conservative (he spent much of the 90s peddling Bill Clinton conspiracy theories), you could start to see an evolution in his thinking during the European crisis.
He’s been a critic of harsh austerity, and the hard money policies of the Germans, having seen directly the ravaging affects on the PIIGS.
Here he was in late May, in a column about Spain:
This can end only in two ways. Either Germany tolerates massive monetary reflation by the ECB or Spain will be forced out of EMU, setting off a catastrophic chain-reaction through north Europe’s banking system.
If Europe’s ultra-Left has so far reaped little dividend from the great “Crisis of Capitalism”, this will surely change as the eurozone’s 1930s policies of wage deflation sap the credibility of the governing centre and the EU itself.
Thus, it was hardly surprising in early September, when he wrote a column blasting the Fed for not doing more to prevent a depression in the US. The title was: Dangerous Defeatism is taking hold among America’s economic elites.
He called for massive Fed action:
Get a grip, the lot of you. While there is no easy way out for the US after stealing so much prosperity from the future through debt, there is no excuse for this dead-end defeatism. Clearly, the ‘canonical New Keynesian’ model that holds such sway on America’s elites is intellectually exhausted.
The Fed has an arsenal of neutron bombs if it wants to use them, and uses them correctly. It can engage in “monetary policy a l’outrance” as Maynard Keynes proposed in his Treatise on Money in 1930, before he lost his way with the General Theory.
Blitz the market with bond purchases, but do so outside the banking system by buying from insurers, pension funds, and the public. This would gain traction on the broad M3 money instead of letting it collapse (yes, the “monetary base” has exploded, but that is a red herring), working through the classic Fisher/Friedman mechanisms of the quantity of money theory.
Amazing — calling for the Fed to use neutron bombs to pump money into the economy! — yet not surprising at all to anyone that’s watched his columns over the last several months.
But apparently that was just too much for his hard-money fans, who couldn’t accept Pritchard’s monetary blasphemy.
And so this week he actually wrote a really embarrassing mea culpa:
My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.
Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills. Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk 80 years ago.
That really makes no sense. You can’t at once call for the Fed to deploy neutron bombs, but then be gobsmacked when the Fed (consistent with its mandate) pursues inflation.
He even played the Weimar card:
So why did he switch? Well, basically, his readers got too angry.
So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control.
Dear Ambrose, anytime you dare to suggest some alternative to austerity and hard money, you’ll get angry emails from people in Idaho with guns and krugerrands. It doesn’t mean you have to write a contrived apology.