Chris Battle is the author of The Satoshi Strategy: Bitcoin, System Dynamics, and the Architecture of Sound Money, and runs a tutoring business in Bedford.
Kemi Badenoch has already shown one of Margaret Thatcher’s rarer political gifts: the discipline to hold a single point rather than scatter fire across a dozen smaller ones.
Britain has not closed a single financial year in budget surplus since 2000/01, through boom, bust, austerity or recovery. That is the story of a quarter century of successive British governments. It is worth remembering, too, that Thatcher herself served in Edward Heath’s cabinet, remembered for U-turns rather than the reforms she would later deliver. Nobody argues that this disqualified her from leading differently once she led, and the same latitude is worth extending to Badenoch now.
Steve Baker has been making a version of this case for over a decade, and has largely been right in what he says. Quantitative easing and loose money corrode savers and stoke inflation. But a backbencher’s warning, delivered without the political skill to sell it as conviction rather than gloom, was never going to appeal to voters nationally.
That is the real lesson of Thatcher. Voters in 1979 did not choose her because the medicine was pleasant, but because she said it as though she believed it, and had a plan rather than an apology. Badenoch’s willingness to make the case for cutting welfare spending shows the same seriousness. Reform’s poll numbers may currently suggest otherwise, but a platform of spending more while borrowing less rarely survives contact with government. And as that contradiction becomes harder to hide, voters who value seriousness over slogans will have somewhere to return to. Sound money is the same argument, just in a different register.
Britain once had this discipline and lost it in a way that is instructive. Lawson turned a Public Sector Borrowing Requirement of billions into an outright surplus by 1988. Brown’s golden rule (borrow only to invest over the cycle) looked like a continuation of that discipline for a decade. But the real story owes less to virtue than to timing: China’s entry into world trade, automation and the internet’s effect on prices let Western governments borrow and spend at low rates without the inflationary price that would once have followed. New Labour built a welfare state on somebody else’s disinflation and called it prudence. When the tailwind faded, the rule was quietly redefined, most visibly by stretching the definition of the cycle itself.
What followed was worse, precisely because it was avoidable. Cameron, Osborne, May and Johnson each inherited the lesson of 2008 and declined to learn it, speaking the language of austerity while staying addicted to the cheap money that helped incubate the crisis, treating rock-bottom rates as permanent rather than a gift. A rule written by those it constrains will eventually be rewritten by them, and cheap money enjoyed by those it disciplines will eventually be presumed upon.
One legacy is now working its way through the public finances. Around a quarter of the Government’s wholesale debt sits in index-linked gilts, or ‘linkers’, an unusually high share by international standards. These looked cheap when inflation was low, and have proved far less so since, with the automatic uplift now a rising claim on the budget that squeezes out other commitments without a vote ever being cast.
The old gold standard, whatever its flaws, rested on a principle worth remembering. It did not prevent borrowing, but made the consequences harder to evade. Banknotes convertible into gold at a fixed rate meant a central bank could not create money without regard to its reserves, so persistent deficits eventually produced gold outflows, higher rates and a crisis of confidence. Politicians retained choices, but could not indefinitely conceal their cost; sooner or later they had to raise taxes openly, cut spending or abandon the promise on which the currency rested. Britain’s clearest lesson in how not to restore such a constraint was the return to gold in 1925, at the wrong rate and on a timetable set by convenience, a decision Keynes savaged at the time.
Nobody should pretend Britain can recreate the gold standard, or place sterling on a hard-asset foundation overnight. But the principle remains relevant: sound money requires an anchor politicians cannot manufacture when restraint becomes inconvenient.
That is why Bitcoin deserves serious consideration alongside gold as a possible component of a future reserve, its supply beyond the reach of any finance minister, central banker or committee. A growing number of companies already hold it as a treasury asset, while economists, fund managers and some central banks are examining whether it could perform a reserve function. Whether that leads to Bitcoin sitting alongside gold, or much later to a harder settlement, requires far more work, but the direction, restoring an external constraint on governments’ power to debase money and defer difficult choices, is worth debating.
What Badenoch has, and what Baker never quite found, is the ability to say this and be heard as a leader with a plan rather than a technician with a warning. Moderate centre-right voters have been waiting a long time for someone to name this problem properly, and to show, as Thatcher once did, that leaving a difficult government behind is no bar to leading a transformative one. She should take the opportunity while it is hers.
Chris Battle is the author of The Satoshi Strategy: Bitcoin, System Dynamics, and the Architecture of Sound Money, and runs a tutoring business in Bedford.
Kemi Badenoch has already shown one of Margaret Thatcher’s rarer political gifts: the discipline to hold a single point rather than scatter fire across a dozen smaller ones.
Britain has not closed a single financial year in budget surplus since 2000/01, through boom, bust, austerity or recovery. That is the story of a quarter century of successive British governments. It is worth remembering, too, that Thatcher herself served in Edward Heath’s cabinet, remembered for U-turns rather than the reforms she would later deliver. Nobody argues that this disqualified her from leading differently once she led, and the same latitude is worth extending to Badenoch now.
Steve Baker has been making a version of this case for over a decade, and has largely been right in what he says. Quantitative easing and loose money corrode savers and stoke inflation. But a backbencher’s warning, delivered without the political skill to sell it as conviction rather than gloom, was never going to appeal to voters nationally.
That is the real lesson of Thatcher. Voters in 1979 did not choose her because the medicine was pleasant, but because she said it as though she believed it, and had a plan rather than an apology. Badenoch’s willingness to make the case for cutting welfare spending shows the same seriousness. Reform’s poll numbers may currently suggest otherwise, but a platform of spending more while borrowing less rarely survives contact with government. And as that contradiction becomes harder to hide, voters who value seriousness over slogans will have somewhere to return to. Sound money is the same argument, just in a different register.
Britain once had this discipline and lost it in a way that is instructive. Lawson turned a Public Sector Borrowing Requirement of billions into an outright surplus by 1988. Brown’s golden rule (borrow only to invest over the cycle) looked like a continuation of that discipline for a decade. But the real story owes less to virtue than to timing: China’s entry into world trade, automation and the internet’s effect on prices let Western governments borrow and spend at low rates without the inflationary price that would once have followed. New Labour built a welfare state on somebody else’s disinflation and called it prudence. When the tailwind faded, the rule was quietly redefined, most visibly by stretching the definition of the cycle itself.
What followed was worse, precisely because it was avoidable. Cameron, Osborne, May and Johnson each inherited the lesson of 2008 and declined to learn it, speaking the language of austerity while staying addicted to the cheap money that helped incubate the crisis, treating rock-bottom rates as permanent rather than a gift. A rule written by those it constrains will eventually be rewritten by them, and cheap money enjoyed by those it disciplines will eventually be presumed upon.
One legacy is now working its way through the public finances. Around a quarter of the Government’s wholesale debt sits in index-linked gilts, or ‘linkers’, an unusually high share by international standards. These looked cheap when inflation was low, and have proved far less so since, with the automatic uplift now a rising claim on the budget that squeezes out other commitments without a vote ever being cast.
The old gold standard, whatever its flaws, rested on a principle worth remembering. It did not prevent borrowing, but made the consequences harder to evade. Banknotes convertible into gold at a fixed rate meant a central bank could not create money without regard to its reserves, so persistent deficits eventually produced gold outflows, higher rates and a crisis of confidence. Politicians retained choices, but could not indefinitely conceal their cost; sooner or later they had to raise taxes openly, cut spending or abandon the promise on which the currency rested. Britain’s clearest lesson in how not to restore such a constraint was the return to gold in 1925, at the wrong rate and on a timetable set by convenience, a decision Keynes savaged at the time.
Nobody should pretend Britain can recreate the gold standard, or place sterling on a hard-asset foundation overnight. But the principle remains relevant: sound money requires an anchor politicians cannot manufacture when restraint becomes inconvenient.
That is why Bitcoin deserves serious consideration alongside gold as a possible component of a future reserve, its supply beyond the reach of any finance minister, central banker or committee. A growing number of companies already hold it as a treasury asset, while economists, fund managers and some central banks are examining whether it could perform a reserve function. Whether that leads to Bitcoin sitting alongside gold, or much later to a harder settlement, requires far more work, but the direction, restoring an external constraint on governments’ power to debase money and defer difficult choices, is worth debating.
What Badenoch has, and what Baker never quite found, is the ability to say this and be heard as a leader with a plan rather than a technician with a warning. Moderate centre-right voters have been waiting a long time for someone to name this problem properly, and to show, as Thatcher once did, that leaving a difficult government behind is no bar to leading a transformative one. She should take the opportunity while it is hers.