Michael B. Duff

People spend a lot of time making predictions on the Internet, but are rarely, if ever, called upon to account for those predictions. Recently, I’ve admitted that libertarianism has a credibility problem. We predict doom and gloom so often, we become economists who cry wolf — easily dismissed during long, dramatic boom periods.

The effects of Keynesian economic stimulus (government spending) take effect relatively quickly, but the consequences occur on a whole different time scale. These policies can extend for a very long time, as long as you can find another source of cash to prop them up. Globalization gave governments a tremendous amount of capital to borrow on, and on an emotional level, everybody WANTS this to work. Everybody in the system from the government officials at the top to the bankers in the middle to the individual investor at the bottom wants to believe that money is the same as wealth, and that easy credit is the key to prosperity.

So, here’s a series of predictions I made in 1999 — predictions that sounded utterly ridiculous at the time and actually looked dumber every year thereafter, as Europe benefited from a global economic boom and the Euro was heralded as a tremendous success.

I posted this to alt.politics.jaffo on January 1, 1999, referring to a Forbes article that is, shockingly, still available:

I’m not nearly as worried about Y2K as am about this unified European currency.

Europe is a collection of seriously fucked-up welfare states. You don’t make a ward full of sick people healthy by stapling them together. All you get is one giant sick person.

This article explains how the Euro will pave the way for one giant Neosocialist economy in Europe.

The next decade could be very tough for Europe and America. We might see a global recession.

If Y2K doesn’t kick our asses, the European currency will.

It’ll take about 2 to 5 years for the shit to hit the fan.

The amusing part is by the time everything goes to hell, the guys who voted for it will all be gone.

Look for economic booms in Greece, Ireland, Spain, and the other European nations leaning on France and Germany.

Those booms are totally artificial, like the American boom in the 1920’s.

The Roaring 20’s weren’t based on real growth, they were based on permissive monetary policy. Eventually, the debt will catch up with them, and they’ll have a recession or depression.

The little economies around Germany and France will fall over like dominos.

Then the big boys suffer from trying to bail them out.

This will be an ugly, icky 10 years for Europe, and America could end up in the same boat if we’re not careful.

My error? The consequences took almost twice as long as I thought they would. I believe the same thing is happening now.

On February 25, 1999 I wrote:

I have been predicting disaster for the Euro since the beginning,
based strictly on political factors.

It’s too early to know if my prediction is accurate, but this early
sign of weakness provides some evidence for my position.

The fact is, the European economy is SICK. Double digit unemployment,
preposterous budget deficits, and worst of all, a huge European
bureaucracy eager to regulate every minute detail of this new “free
trade.”

The Euro is inherently unstable as a monetary unit because the
economies underneath it are Neosocialist nightmares.

We’ll see if the evidence matches my prediction over time.

You’ll see that I’ve created a Predictions category in my del.icio.us bookmarks now. I invite you to check back from time to time to see who ends up being right and wrong as this giant 10-year curve begins to turn down. It may take another 10 years, or one unlikely event could trigger a panic and fire off 10,000 stock market algos all at once.

We shall see.