By Tom Bradley

“In the 1960s and 1970s, mid-western American states fell victim to scores of wildfires. Constant interventions by the US Forest Service appeared to have little positive impact – if anything, the problems seemed to worsen. Over time, foresters came to appreciate that fires were a normal and healthy element of the forest ecosystem. By continually suppressing small fires, they were unwittingly creating the conditions for larger and less containable wildfires in the future. Naturally occurring fires are necessary to remove old forest cover, underbrush and debris. If they are suppressed, the inevitable conflagration to come has a far greater store of latent fuel at its disposal.” – Tim Price, PFP Wealth Management, London, England

Is forest fire control analogous to the capital markets? You betcha. I could explain, by I’ll let Mr. Price finish the job. Further in his October 28th letter he closes the loop.

“There is a glaring hole at the centre of modern economies. It is called central banking. We accept (or should do) that the modern economic world is highly complex, with practically infinite interactions between countries, governments, exchange rates, interest rates, stock markets, corporations, households, entrepreneurs, and consumers. In most areas we also accept that free markets are perfectly capable of driving Adam Smith’s “invisible hand” to ensure that enlightened self-interest benefits the many as opposed to the few. But that one institution – the central bank – is even capable of mastering such complexity and fine-tuning the workings of a highly complex economy through the brute mechanism of dictating the price of money is barely discussed. Of course central banks have now gone far beyond their original mandate of tweaking interest rates ...”