John Browne, former member of Parliament

Politicians and the media tell us our economy has tiptoed back from the brink of catastrophe and that a recovery is under way. They haven’t convinced John Browne, a former Conservative Member of Parliament under Prime Minister Margaret Thatcher who now writes and lectures on political, economic, financial and defense issues. A Palm Beach County resident and investment advisor, Browne was our November speaker.

“Things were really desperate, and now, suddenly, as if by magic, it seems that everything is all right,” Browne said. But this return to normal is an illusion, he said. “The same behemoth banks are still there, only now they’re larger. The same toxic assets are there, only now they’re hidden.” Meanwhile, consumer confidence has dropped to levels not seen since the 1930s. So to those paying attention, the facts don’t fit the rhetoric.

“In the 1960s, people took acid to make things look weird. Now, we take Prozac to make them look normal,” Browne observed. “So you have to ask yourself, are we being fed political and economic Prozac?”

We are told unemployment is over 10%, which is a cause for concern, but the real figure is more like 18% when you include those who have stopped looking for work or have been downgraded into part-time employment. Statistics like unemployment and inflation rates are being manipulated by the government to make the economy look healthier than it really is, while our political leaders are acting as cheerleaders for renewed investment in the stock market, he argued.

Browne believes the root problems go back to President Johnson’s introduction of entitlement programs, which have grown to the point where we have a consumer-driven economy, consuming three times what we produce and financing the difference with debt. This trend is almost impossible to reverse in the face of popular politics, Browne said, because “if you’re a voter, and you can get free money, I’d always vote for free money.”

Yet this “$125 trillion Ponzi scheme” will soon come crashing down, Browne believes. “The whole world is wondering if it’s ever going to be paid back,” he said, and the national banks of other countries such as China and India are starting to edge away from reliance on the dollar. If the U.S. dollar should ever lose its status as the world’s standard reserve currency, it’s value will plummet, he said.

Meanwhile, the inflation that would normally be expected to result from pumping more money into the economy is being suppressed by some slight of hand by the Federal Reserve, which is loaning money to banks at zero interest and allowing them to loan it back at 3% interest. This is keeping money bottled up in the system, rather than lent out to companies or individuals, thus the lack of inflation. But at some point, it’s likely that the government will take the brakes off in an attempt to stimulate the economy. The result could easily be stagflation (inflation unaccompanied by economic growth) even worse than the U.S. saw in the 1980s.

That economic crisis was ended due to the courage of Fed Chairman Volcker. Volcker couldn’t have pulled it off without “the backing of a great man, President Reagan,” he said, “but I ask you, what sort of backing would a Fed Chairman get today?” He argued the right way to have addressed the economic crisis would have been with something like a two-year tax holiday to put money in people’s pockets and spur consumer spending. He also believes that, despite its rhetoric on investing in infrastructure, the Obama administration has allowed too much infrastructure spending to be siphoned off to fund entitlements.

Ultimately, the political consequence of cowardly economic policy may be revolution – something this summer’s Tea Party rallies only hint at. But although Browne showed some sympathy with the need for the “grassroots revulsion … against the total immorality and corruption of government,” he also said it worries him that revolution without wise leadership can present an opportunity for someone like Lenin or Hitler. “It’s dangerous because of who might seize control,” he said.

The only good news Browne is that there is always opportunity amidst catastrophe “for the people who see this coming and take action to counter it,” Browne said. “The people who are really wise may actually increase their wealth, at least in relative terms but maybe in excellent terms.”

See also: event photos by Lee Hershfield

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