By Peter B. Meyer – 5th of May 2013
Austerity doesn’t work. Austerity in the EU has reached the limit, focusing on growth is becoming the priority. EU nations like Ireland, Greece, Portugal and Spain tried it. They cut spending. They fired people, and increased taxes that have shown, not to increase but lower revenues. But they got nothing from it in return except extending the recession to over six years with no end in sight, resulting in more unemployment and larger deficits. The budgets are still far out of balance, with deficits way above the 3% limited that is demanded by the European Union, and a necessity to keep the EU bureaucracy alive. The required debt reductions never will materialize, and debt extensions will be applied over and again. Unemployment goes up, and GDP goes down. Default and debt restructuring, or the return to a currency pegged to gold, will cure the crisis.
Now you understand that the BIS in Basel Switzerland pulls the strings of the world’s monetary system, you also understand that they have the ability to create a financial boom or bust. “Reversing the logic that a sound banking system should lead to full employment and developmental growth, BIS regulations demand high unemployment and developmental degradation in national economies as the fair price for a sound global private banking system.”
Recall, how this is implemented: “BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies… The IMF and the international banks regulated by the BIS act as a team: the international banks lend recklessly to borrowers in emerging economies to create a foreign currency debt crisis, the IMF arrives as a carrier of monetary virus in the name of sound monetary policy, then the international banks come as vulture investors in the name of financial rescue to acquire national banks deemed capital inadequate and insolvent by the BIS.”
The prime objective is to fill the pockets of the elite; “The BIS is where all of the world’s central banks meet to analyze the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them…”
It must be clear that an end to this crisis will be an illusion, as the banking system isn’t interested it. As décor, the European central bankers now commence to agree that they didn’t fully realize that their austerity policies instigated by Mrs. Merkel, could have nasty side effects, and need to slow the pace of budget cutting and focus on growth and creating jobs, but that’s a smoke screen. The one purpose only, is extending the crisis, for filling banker’s pockets.
One of the keenest promoters of austerity in Europe, Merkel’s pal Wolfgang Schaeuble, the German Finance Minister, said; “fiscal and financial sector adjustments remain crucial to regain lost credibility and strengthen confidence.’’
And worse, EU’s second largest economy, France missed its deficit goal in 2012 that stuck at 4.8% of economic output, as EU data showed. France is now appealing to the European Commission, which is to decide on whether to give France more time to bring their deficits down towards the EU limit of 3 percent.
Spain also failed to meet the target deficit as the shortfall totaled 10.6% of GDP, above the European Commission's forecast of 10.2%. Spanish banks hold at least €250 billion Euros worth of unsold and partly half finished property and underperforming property loans on their books. Mortgages are easy to calculate but who appraises the underlying property value? Banks are walking away, leaving thousands of homes vacant because they don't want to be responsible for maintaining them, they should take property ownership by foreclosing and thereafter paying the back taxes, homeowner's dues, and other expenses, now are saying no thanks. The math just doesn't work. Here very big problems can arise, as ‘assets’ are usually the last thing to be written down by banks. What is Spanish property worth today? Well, if bankers offer you, what they claim is worth 100 billion Euros; I would first bargain to get a lower price.
Spain announced last week that unemployment hit 27.2% for the first quarter. That's the highest since 1976 and represents about 6,2 million Spaniards without a job, while youth unemployment is over 57%.
Adding to Europe's woes is the first downturn in Germany's private-sector output since November. Financial research firm Markit released a report this week saying the country's commercial output is at a six-month lows. Both manufacturing and service sectors contracted during April. Manufacturing dropped the most and the fastest.
The EU itself also had moments of idiocy. To enter the single currency project, governments effectively audited themselves. So when Greece presented its data - presumably on the back of a gilded cigarette packet to mark such a momentous statistical moment - the EU officials could only ask “are these figures correct?” When the Greek official looked mistrustfully, and said “of course!” the EU let them join the Euro.
Another EU member, Slovenia was badly hit too by the global financial crisis and fell into recession last year amid lower export demand and a fall in domestic spending caused by budget cuts. Unemployment is at a 14-year high, and is expected to rise further. Slovenia was the first republic to dismantle the great country of Yugoslavia. Now, they could be the first to dismantle the EU.
Contrary to this doom and gloom is Iceland, which took a devastating blow in the 2008 economic crisis by defaulting, and is now
Mr. Barroso, chairman of the EU commission, prefers now to give austerity nations more time to rein in their budget deficits. For those, even the EU self, struggling to follow economic reality, is a bit like telling a dying patient the painful tourniquet will be slightly less tightened to let them bleed to death more slowly. It’s longevity but hardly quality of life.
Mr. Barroso also suggests more spending but what can a deeply indebted government spend? Without Euros, EU nations have no currency of their own, while bond investors have buyer fatigue. Without defaulting, leaving the Euro simply raises the debt burden in their new devalued currency...
Greedy bankers, particularly in France and Germany, grew rich buying PIIGS bonds myopically rated as collateral equal in quality to that of fiscally prudent issuers. Now Mrs. Merkel is squeezed in a corner. Damned if she shovels cash through the bailout opening, she will be damned by her collapsing financial sector if the PIIGS default on the truly junk bonds, which for a decade western banks swallowed like vodka with caviar.
European Central Bank officials decided for a rate cut
of 0,25% to improve the economy, and said the ECB is ready to act if more is required. Where are all these troubles originated? “Austrian Economic Scholars generally argue that inherently damaging and ineffective central bank policies, including unsustainable expansion of bank credit through fractional reserve banking
, are the predominant cause of most business cycles, as they tend to set artificial interest rates too low for too long
, resulting in excessive credit creation, speculative "bubbles
", and artificially low savings. Low interest rates are a kind of push around. They take money from savers and redistribute it to debtors. Borrowers, such as the big banks, get money at a preferentially, artificially low rate. While savers pay the price.”
Most likely, the current economic crisis in the EU will lead to a split. “There is absolutely no way that the Eurozone could last forever. They may keep it going for a few more years by invoking even more extreme measures. But ultimately the Eurozone is going to break up. It may be the economics, civil disobedience or violence on a large scale that eventually get some of the Mediterranean countries out. And after that the big question will be what is the EU for? I think the alternative model is Europe based on cooperation, trade, and nation state democracy. I think that vision is one that can only grow in support as years go by.” Said Nigel Faraga in a recent interview.
Actually living beyond your means is no longer politically or socially acceptable. You have to live within your means. The only question left, is ‘who will pay for all this debt’? The answers to that question are not easy. When debt levels were low, the answer was probably ‘future generations of taxpayers.’ At today’s debt levels it is unlikely that the debt will ever reach future generations. And with so much of the debt taken up by the central bank the burden shifts, from lenders to borrowers, to taxpayers and consumers. Eventually the rescuers will be default, as debt restructuring is politically out of the question.
“Governments won’t be able to fulfill the promises made to their citizens. The grand bargain of the modern, social welfare state will begin to look more and more like a bad deal. Young, unemployed people will become increasingly fed up. They will look for radical solutions, while more radical leaders provide answers that most likely are wrong too. To be responded to by Governments with inherently reactionary answers in the best of circumstances, to finally react with repression, not too peaceably executed.
Governments will cultivate their zombie clients, like the Ancient Regime did, by protecting them. The defense industry, for example, will probably successfully direct citizens’ rage against imaginary foreign enemies, and thereby increase its own power and wealth. Whether the Boston tragedy, like 9/11 was an inside job or not, it is clearly and sadly being exploited to revamp the “War on terror”, justifying the police state apparatus in the US and other Western countries, and legitimize attacks on our rights and liberties, to counter inevitably turmoil, revolution and chaos. The recent wars were based on lies and their costs are staggering, ironically all in the name of “justice” and to combat “terrorism” taking innocent lives of people across the world with the objective to cultivate the defense industry and its zombie clients.
Real prosperity can't come until all the "poison" is out of the economic system. The result of underestimating these cycles is catastrophic, and a force much more powerful than any government can control. So the real economy will weaken. Revolution will begin. Finally, the middle class will be broke the poor were already broke and the country will be ruined by the Elite. Eventually, the government you have counted on to "save" you can't even save itself. This is not easy to accept. Despite being in the back of your mind, most people will simply choose to ignore it, hoping it goes away on its own. Hopefully you are meanwhile smarter than that.
Whether gold looks expensive or not, it is prudent - or even necessary - to own some as insurance, which is the truth. You have to hold gold and silver as the entire global system of paper money and central banking is in the process of self-destructing. And maybe in a relatively short period of time – perhaps five or 10 years – the existing monetary system will collapse. During this period of turmoil, expect that gold and silver will maintain their purchasing power, while all forms of paper money will be rendered worthless.
Gold and silver are a form of savings - a universally recognized form of money that is no one else's liability. In that way, it is far superior to any other form of money currently available today. The price of gold for the time being will be volatile, it may well fall this year again – even significantly. But the value of gold won't change at all.
Eventually, the current monetary system will make speculators out of everyone, as interest rates stay zero. The current monetary system allows the central banks to "bail out" the banks that make terrible lending and borrowing decisions. And as we know meanwhile you can't trust governments to maintain a sound currency, you're less likely to park your savings in that currency. You're more likely to make risky bets on stocks, real estate, and bonds. Less sophisticated people are more likely to gamble with their money in lotteries and casinos. And when you observe the major indexes, you’ll see already the proof in reality.
Soon, Mom and Pop are about to buy stocks big time. They can't live on zero-percent interest. Out of necessity, they will migrate into stocks, away from ultra-low-interest investments, like cash and bonds. And that will kick the market into a major boom phase. Next come the banks and create a bust by selling their assets on a grand scale, to make sure that people won’t have money left to survive on their own. Period.
Finally an interesting note for the Gold Bugs:
"Buyers Scour Asia for Physical Gold," proclaimed a headline in the Financial Times — in a story buried on page 18, because it relates favorably to gold and gold bugs. Though it was exiled to newspaper Siberia (Section II, to be precise), the Financial Times article vividly detailed a scramble across Asian markets for the yellow metal.
Indeed, per the Times' report, “Asia is witnessing one of the strongest waves of physical gold buying in thirty years.” The Times article used terms like “feverish buying,” as well as “gold rush,” just a week after a massive selloff of paper gold…
Wasn't the apparent selloff supposed to mark a turning point for gold? Isn't the tide receding for what every good student of Economics 101 has learnt is merely a “barbarous relic,” per John Maynard Keynes? Yet strong Asian gold demand is contrary to Western convention. When the price of something falls, goes the rule, it's because people are selling product, not buying it, right? Then again, what exactly tumbled in price last week? There's a new truth apparent in the marketplace. There's paper gold, reflecting so-called “contracts” that change hands on a trading venue operated by CME Group, called COMEX. And then there's the real McCoy of physical metal, which trades hands on gold exchanges across the world. These are two quite different things.
By Peter B. Meyer – 1st of February 2013
The Nobel Prize 2012 for Freedom was awarded to the EU, many may wonder about the kind of deliberations by the jury who must be blind and deaf, to reach this decision, in a time the EU falls apart. Never has been the temper of the 27 nations so much distressed. Three of the 17 euro currency nations live on bailouts and are technically broke, two more Italy and Spain are on the verge of bankruptcy and receive hidden bailouts from the ECB that buys their debt with freshly printed money. Even the so trusted good relation between the two-core members Germany and France is severely damaged since France’s new President Holande took office half way last year.
EU citizens blame rightly Brussels, the seat of the EU, for establishing a ‘Fourth Reich’ with an army of 34.000 bureaucrats paid for by EU taxpayers. Resulting in fear of a severe German influence, creating an unworkable environment for the euro by demanding pay from the EU citizens for their exorbitant expenses.
All over Europe people are in revolt and protest against the dictated austerity measures by Brussels and Germany’s Angela Merkel. Factually there is no EU Freedom at all.
The virtue of the proposed and partly accepted European Banking Union (EBU) for the EU is the power the ECB receives to streamline the continental-banking sector. This is against the will of Britain that risks the loss of influence for the City of London that dominates the financial banking as clearinghouse for euro dominated transactions. If those are not safeguarded Britain almost certainly will veto de EBU.
London correctly is demanding that the EU get its act together to do its part of the austerity they require from member states, by freezing their own budget and tightening their own belts, amongst others, reducing the EU bureaucracy. But Angela Merkel says the EU leaders are doing the right thing, despite and not because of Britain.
Reports about the Euro’s demise are downright false, essentially because Angela simply says that not letting to happen. That maybe true if politics triumph over economics, but in the increasingly treacherous condition of the EU this pledge doesn’t sound credible. The EU’s outlook continues to worsen. The more austerity is implemented, the higher rise the unemployment numbers. The longer it takes the EU to adjust to this environment, the harder the task becomes.
In the PIIGS countries and France much tougher measure are required to shrink states’ bureaucracies, and dismantle regulatory barriers to growth; courage is needed to tackle the restrictive unions; and aggressively restructuring the EU banks, particularly in Spain.
The viability of the Euro remains still in doubt, because the immediate effect of austerity measures drive the euro zone economies further apart. The short term Euro outlook might likely have improved but that is pure cosmetic based on the confidence trick applied last July by ECB’s Draghi ‘to do whatever it takes to preserve the euro’, by buying virtually all of Spanish and Italian bonds with ‘out of thin air’ printed money, and so reducing their respective borrowing costs. Without the ECB commitment to ‘outright monetary transactions’ (OMT) the bond market would have demanded much higher premiums that Spain and Italy wouldn’t have been able to pay to service their debts.
These outlays above all are on the expense of Germany; not only translates the OMT as extra costs for the German taxpayers but Merkel has, whatever she may say to the contrary, put a commitment to preserving the euro ahead of sound monetary policy. So far only enabling governments to treat the symptoms by financing debt cheaply. Again, more time is bought, kick the can further down the road, where at the end disaster is waiting.
Look at some of the most serious facts: Spain still is not out of the woods with their real estate disaster, over one million new and half-built properties in stock on the banks’ account, daily increasing numbers of newly foreclosed houses from people that cannot pay their mortgages. A looming credit bubble of none performing loans. The banking sector is for at least € 250.000 milliard underwater.
Italy with its bank failures that still aren’t in the open, remember UniCredit? UniCredit is the direct descendant of the Austrian Kredit-Anstalt, the largest bank in Eastern Europe before the Second World War. The Rothschild family –a well known Elite member- founded this bank in 1855, and became one of the leading banks in Europe. The default of Kredit-Anstalt caused the Great depression of the 1930s. Now UniCredit is the most indebted bank again. Recently the world’s oldest bank the Italian bank Monte dei Paschi di Siena came in big troubles too.
Europe's banking system accumulated €55 trillion in assets – about equal to the total debt -public, private, corporate- in the United States. But Europe's banking system is four times larger than the U.S. banking system, and stuffed to the brim with sovereign debts that never will be repaid.
Greece received €200 milliard on bailouts and is virtually broke. Germany paid the larger part of this money. At least till after the German elections in September, Merkel is not going to tell German taxpayers that they will not getting this money back, while a Greece exit from the Euro remains still a possibility.
All this is sufficient proof to show how hopeless the situation has become; when government is equated with the economy. These're two entirely different things. The only way to revitalize the economy is a vast reduction in taxes and a vast reduction in government spending, and of course debt restructuring by default.
This says Doug Casey about it: "Instead, these idiots are arguing over how much to raise taxes and how little they can cut spending. Of course, it will be a disaster. "Higher taxes would suck more capital out of the productive economy and divert it to the government -- that's very bad. And lower government spending would help unravel distortions and misallocations of capital that spending was causing -- which is good.
"In the process, some people would have to find new jobs, and some businesses dealing with government handouts would go bust. Painful, but necessary, and we need to see lots more of both.
"In short, it'll be harder to earn an honest living, and there will be less incentive to invest wisely, but bloated government will continue running the printing presses as fast as they'll go. I think we'll see at least a trillion-dollar deficit next year (2013 in the USA). Maybe more like $1.5 trillion."
"The one thing we know for sure," Doug concludes, "is that the world is being flooded with new funny money. Economic contraction is masking the effect, and that money is just sitting in banks now, but you can't print trillions and trillions of new currency units indefinitely without inflation showing up.”
Consequently, the economic implosion of Europe and the USA is accelerating. Even while the mainstream media continues to proclaim that the financial crisis in Europe has been "averted", the economic statistics that are coming out of Europe just continue to get worse. Manufacturing activity in Europe has been contracting month after month, the unemployment rate in the EU has hit yet another brand new record high, the official unemployment rates in Greece 25% and in Spain 26,2% are now much higher than the peak unemployment rate in the United States during the Great Depression of the 1930s.
Today’s economic situation in Europe is far worse than it was a year ago, and it is going to continue to get worse as austerity continues to take a huge toll on the economies of the EU. It would be hard to understate how bad things have gotten - particularly in southern Europe. The truth is that most of southern Europe is experiencing a full-blown economic depression right now. Sadly, most Americans are paying very little attention to what is going on in the EU. But they should be watching, because this is what happens when nations accumulate too much debt. The United States has the biggest debt burden of all, and eventually what is happening over in Spain, France, Italy, Portugal and Greece is going to happen in the USA too.
In this market heading for disaster, the best move savers and investors can make is to protect themselves with physical gold and silver.
By Peter B. Meyer – 14th of November 2012
Since 2000, were two crises - the dot-com bubble in 2002, and the housing bubble in 2008, soon there will be third as result of too much public debt and consequent abundant money printing. As the financial crisis gets worse, so will the political backlash and the disruptions in society. This scenario suggests much higher inflation, disenfranchisement of people, and government oppression to maintain control. As meanwhile is revealed, the EU is on the exit, since forced ‘rule breaking’ efforts are undertaken to keep the EU spectacle going on.
The latest crisis-busting solution let the ECB to buy government debt - named Outright Monetary Transactions [OMTs], which has drawn criticism from economists who claim it is equal to financing governments struggling to control their debt burdens. The potentially unlimited OMT program has created a rift between Germany's central bank president Jens Weidmann and the ECB, who says the measures pose a risk to euro-area stability.
This OMT program was launched on September 6 at the bank's monthly press conference in Frankfurt, following political pleas for action from Italy and Spain. Prime Ministers Mario Monti from Italy and Mariano Rajoy from Spain had both urged the ECB to buy bonds of their countries to lower unsustainable levels of interest on debt. Nonetheless, Draghi the ECB President maintained this solution is not a tactic to fund the debt-stricken nations.
Frank Schaeffler, a member of the German Free Democrat Party said: "Many Germans have become skeptical towards the antics of the ECB." However, he added, "there is not much credibility left to be damaged."
As counter action, the German Central Bank - Bundesbank could convert its liabilities from euros to deutsche marks at a predetermined exchange rate and take a one-time write-down on assets related to claims on PIIGS central banks. It would certainly be costly, but the alternative is worse: perpetually financing EU nations unwilling to restructure unaffordable public benefit programs for their economies.
Having seen the examples of Greece and Portugal, the Spanish public suspects that austerity will only make things worse. Spain will come to believe that its salvation lies in the printing press — in the ability to inflate away its heavy debt burden. Via the OMT the ECB buys Spanish and Italian debt, Mario Draghi now has no choice but to fire up the euro printing press.
Rajoy’s budget cuts will not be enough. Spain can’t afford to fiddle around the edges. It needs a financial restructuring focused on the zombie banks. The banks still haven’t come close to admitting their real capital shortfalls. Until there is a restructuring, with substantial haircuts for bank shareholders and bondholders, projections of economic recovery are pure fantasy.
Even if proposed budget cuts satisfy Germany and the EU, there is no political will for austerity in Spain. That much is clear from the rising protests in the streets of Madrid and other cities. These protests against budget cuts have only just begun. More devastating strikes and protest are announced for the weeks ahead.
The ECB will ultimately find itself the only holder of those bonds. This is what happens when central planners impose prices far below what private investors consider fair value in this case, pushing down Spanish and Italian debt yields, versus a much higher market-based yield for investors.
Germany will watch as this unfolds and realize that Spain’s austerity promises will be broken. The ECB will be left holding the bag with hundreds of billions of Spanish debt, with no possible exit and constant pressure to continue monetizing Spanish debt. It will be then that the drive to exit the euro will pick up speed.
Once the German taxpayers see that the ECB will become the majority holder of Spanish and Italian debt, they will insist that German politicians plan an exit from the euro. Germany could exit from the euro and return to the deutsche mark. While a German exit would offer long-awaited clarity about the future of the EU and the Euro, it would also spark a chaotic scramble to adjust to a new reality.
A German exit would trash the euro’s value against the currency that’s steadily becoming the reserve of choice: gold and silver. Only weak economies with bankrupt governments would be left standing behind the euro. The ECB would be free to monetize as much Italian and Spanish debt as it wished and print the necessary euros to buy government bonds.
“The economists calling for a weaker currency to restore prosperity to the PIIGS countries would get to see their prescription play out in a real-world laboratory. Results would show that currency debasement does not create stronger, more competitive economies. Countries left in the euro would see collapsing living standards: import prices would rise and capital investment would fall amid a chaotic currency regime.”
ECB president Mario Draghi famously deemed the euro “irreversible”; he would do whatever is necessary to preserve it. But what Draghi sees as necessary will eventually be seen as intolerable in creditor countries like Germany, The Netherlands, and Finland. Those view the euro’s costs as greater than its benefits.
Despite Draghi's best efforts to impress policymakers in the Bundestag, he maybe out of credibility after some time. In September, the Karlsruhe highest court in Europe's largest economy approved and gave legitimacy to the EU permanent rescue fund the ESM.
The OMT program is likely to come before the German constitutional court in December, and it is expected the OMT will meet a different decision. "I foresee that the constitutional court will deem that these OMTs cannot be justified by the ECB." Says Roland Vaubel, a professor of economics at Mannheim University.
Austerity doesn’t work. EU nations like Greece, Portugal and Spain tried it. They cut spending. They fired people. But got nothing from it. The budgets are still far out of balance, with deficits way above the 3% limit demanded by the European Union. Unemployment goes up. GDP goes down.
Greek debt projections have been revised upward partly because the Troika bailouts have added to the debt of the country, according to the Financial Times. So Greece is back on the brink of default. For more details, watch attached video.
By Peter B. Meyer – 31st of July 2012
Democracy is just a wealth-distribution, and ultimately wealth-destruction scheme that pits the taxpayers vs. the tax eaters. In the case of Europe, the Germans, the Fins and the Dutch produce and save, while Greece, Spain, Portugal and the rest consume. Eventually, a bankruptcy will bring to light the truth about democracy, which Hoppe explains as follows:
“It is nothing more than an especially insidious form of communism, and that the politicians who have wrought this immoral and economic madness and who have thereby enriched themselves personally, - never of course, being liable for damages they have caused! - are nothing more than a despicable bunch of communist crooks.” Hans-Hermann Hoppe (born September 2, 1949) is a prominent Austrian school economist
Friedrich von Hayek, another well-known figure in the Austrian school of economics, wrote in his seminal work the Road to Serfdom: "By giving the government unlimited powers, the most arbitrary rule can be made legal; and in this way a democracy may set up the most complete despotism imaginable."
It's hard to ignore Hayek's and Hope’s prescient warnings and words when you observe today’s political manipulations to keep the EU together and the Euro alive. Europeans are deceived in the hope one day a miracle is going to happen that makes the impossible possible and solves this crisis without pain and leaves the EU and its Euro in tact.
However, the Europeans are turning against its Elite austerity pushers. Sarkozy lost to the socialist Holande. The Dutch government of Mark Rutte handed in its resignation. The “technocrat” in Italy and the new government in Greece wonder how long they can hold on, while the Spaniards continue to live in pain under the draconian measures dictated by the Eurocrats.
As in Spain, Greece, Ireland, Portugal and practically all-modern countries, people wait for the government to figure out how to give them retirement incomes, healthcare, and full employment.
Of course, politicians cannot solve economic problems for the very simple reason: they themselves are the cause of them. Despite all the phony governments’ interventions the recovery is not coming and will not come either, because it is impossible at this stage of overflowing debt.
Recovery is impossible because this isn’t an ordinary recession it is a depression ‘the end of the economic road’. The world faces a huge solvency and not a liquidity problem. New money supply cannot restore health to sick loans and government bonds. The only way to restore solvency to the financial system is to deflate the economy or slash the amount of debt through mass bankruptcy.
Who set up the euro? Who set interest rates and lending standards? Who caused the bubbles by lending too low for too long? Who then ‘fixed’ the crisis — by lending more, at even lower rates, to the very financial institutions who had just proven such bad custodians?
Who spends more than he makes, year in and year out? Who promises even more spending — even as he is facing bankruptcy? Who counterfeits money — printing trillions of dollars and euros with nothing more behind them than the “good faith” and “full credit” of an insolvent bankrupt government? Who starts ‘wars’ that cost trillions of dollars and hundreds of thousands of lives, and then, standing over the wreckage announcing victory, and goes away?
The elite – the ONE % - are defending their turf by creating wars, unnecessary fears about terrorist attacks, instating security checks at airport the world could do without, global warming hysteria, uneconomic recycling of waste costing more than the conventional way, keeping-on more money printing until the bitter end, extending the pain, and causing extra expenses for citizens, but with the hidden purpose to create added income for themselves, in doing so unnecessarily extending the suffering for the populace.
An honest man knows better than to interfere in other peoples’ business. His own business is tough enough. He cares deeply about the things around him, and tries to make his world better in every way he can. But he would be embarrassed to pretend to solve other peoples’ problems. Even if he is only offering advice, he does so reluctantly, carefully, and tentatively.
If he is smart he knows that you can’t really make things better by bullying, deceiving and threatening people. An economy works best by doing the one thing that the fixers can’t allow — letting people make their own deals, find their own jobs, and solve their own problems. So really the truth must be camouflaged to let people believe government has everything under control. "Truth has to be repeated constantly, because Error also is being preached all the time, and not just by a few, but by the multitude. In the Press and Encyclopedias, in Schools and Universities, everywhere Error holds sway, feeling happy and comfortable in the knowledge of having Majority on its side." --Goethe
Although Goethe made his insightful observation two hundred years ago, his words hold more meaning today than ever in history. Error can indeed be found throughout stories in the mainstream press, in "official reports" and coming from the very mouths of world leaders, many "democratically" elected. But what even Goethe could not have predicted is the broad extent to which these errors are knowingly, deceptively and insidiously woven into our daily news, effectively subverting the masses and keeping them blind and apathetic to the empirically-driven motives of the world's elite.
Consequently: Governments’ planning and taxation is “the road to serfdom,” pretending “free markets” by giving bankers leeway to act recklessly, oligarchic, undemocratically. Governments are told to bailout the debt-ridden banks benefitting the wealthiest 1% layer of society, by shifting all the losses onto taxpayers.
Governments should act democratically by subordinating the banking and financial sector to serve the economy, and not the other way around as it is today.
Austrian economist Ludwig Von Mises wrote in relation to this crisis the following wise words: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved.”
Ludwig von Mises proudly called himself a liberal. He was the 20th century's great defender of capitalism and the free society. His book, Liberalism
first appeared in 1927 as a follow-up to both Mises' devastating 1922 book showing that socialism would fail and his 1926 book criticizing interventionism. It was written to address the burning question: If not socialism, and if not fascism or interventionism, what form of social arrangement is most conducive to human flourishing? Mises' answer is summed up in the title of his book, Liberalism
By Peter B. Meyer – 26th of July 2012
Who will be first to leave the Euro in this Crisis, Greece, Spain, Italy, France or Germany? The lack of money to finance its debt leaves no other choice, and will force this Exodus. The race could be decided within weeks if not days. Watch the coming weekends, when markets are closed, this operation could take place.
France under Francois Hollande seems in trouble, public debt in France is at 86.1% of GDP but is actually 146% if ECB liabilities and bank guarantees are included. The projected budget deficit this year is 4.5%, with France having herself exempted from the EU’s instruction to bring deficits down to 3% by the end of the year. On the contrary Germany the strong man of the EU could leave too, although more voluntarily, because its total exposure to its beleaguered EU neighbors has soared to €1.5 trillion, while EU member nations ask for more! That’s a staggering sum of money, equal to more than half of German GDP.
At the heart of the European Union project lays the alliance between France and Germany, if France can’t keep itself together, or Germany decides to leave voluntarily the whole EU is doomed.
Nonetheless, leaving the Euro will bring the sovereigns the urgent needed cash to continue their operations. Returning to their own currency is the remedy to reignite their own economy, at the expense of the other EU nations. Although the procedure for each nation is similar, lets take a look how this works out for Spain, because Spain most likely will be the number one.
Spain is borrowing at an interest rate of 7.5%; a level that is said is “unsustainable.” Soon Spain will be shut out the bond market. Policy makers in Madrid are in a panic. Of course, they don’t take any responsibility for this mess. They just blame the short sellers! So they banned short selling for 3 months. That ought to solve the problem, but everyone knows, markets go down because people sell. When you make selling illegal, they think the problem is solved! Simply, it reflects the government’s admission Spanish equities are severely in trouble.
Spaniards won’t accept more austerity; so the last alternative is to exit the Euro, for which the government perhaps will receive more local support, because unemployment levels are heading upwards. Leaving the Euro provides debt deflationary dynamics, ensuring banks having money again.
If all the options are analyzed, Spain has no other choice than to return to its (New) Peseta, and devalue by whatever is necessary. Devaluation is politically the easiest way out, such could happen on one of the coming weekends. On the day of the exit, Spain will initially value the New Peseta at par with the euro, but devaluate immediately thereafter, before the markets and banks open the following Monday.
The government has to make sure that nobody has previous knowledge about this decision until after the revaluation is put into practice. Foreknowledge of a Spanish exit of the EURO and a return to a local currency would cause a bank run of tremendous proportions: People would realize that the government was going to devalue the currency, so they would rush to their banks to withdraw their money and either send this money out of Spain or else hold it in cash under their mattresses. Either way, such a bank run would crater the entire banking sector instantly, because the banks certainly do not hold reserves to meet such a run.
Secrecy and surprise is key to the success of this operation. This is the reason that, if and when there is in fact an exit from the EURO, no one will hear about it until after it has been carried out. When the exit is made, the Spanish economy is basically reset; with at once a healthy banking sector, a reignited export-driven economy, and instantly-attractively priced capital goods.
Bondholders, and those living on a fixed pension will suffer. The purchasing power of their pensions would be reduced by the amount of the devaluation, which could reach up to 75%.
Exit the EU, devalue, and rebuild. The more you look at the situation clinically, the more obvious it is that this theory is the best thing for the long-term health of the Spanish economy.
The common opinion is that no nation can exit the EU, because if it does, it won’t be able to borrow on the bond markets. This is not true, once a government forcibly converts its banks’ and accountholders euro-deposits into - for Spain - NPS deposits it essentially has confiscated the entire quantity of Euros in the country. The government keeps these Euros and will have short and medium term sufficient Euros available and doesn’t need the bond market to borrow Euros.
By forcibly converting into the new currency the government has sufficient quantity of Euros in possession to cover its international balance of payment for imbursements of the necessary essential imports of oil, etc. This doesn’t mean they never have the need to borrow on the international money markets again, but in the medium term they have enough hard currency to survive.
To avoid a run away inflation the government decrees a wage and price freeze, to prevent price increases. Capital controls won’t be necessary due to the fact that all of accountholders’ Euros are confiscated by the conversion into new pesetas. The government further will immediately –before devaluation- foreign debt obligations, without prior provisions to the contrary, will be converted into NPS–bonds. Thereafter it will devalue the NPS by say 30% while eventually a step-by-step devaluation of up to 70% during the following months could be a possibility. The moment this action is made public all foreign currencies will flee the country, but this may be a relatively small amount. All these measures have got to be implemented in the course of one weekend.
The only problem the government faces, is that all these have to be executed swiftly with 100% secrecy without any leak. Prior knowledge of this move will cause an enormous capital out flow and bank runs that cannot be covered by sufficient euro liquidity.
Many small businesses will go bust, because of foreign currency commitments that cannot be met, while as a consequence the unemployment rate, in the short run will increase, but thereafter quickly be reduced.
Take care you have gold and silver coins in your possession at home, and take your surplus liquidity out of your account immediately or transfer it in a foreign currency other than the euro. Hoard immediately all the stuff you need in the foreseeable future. While black markets will become the popular exchange trade.
By Peter B. Meyer – 24th of July 2012
The sunny years have passed. Now there are storm clouds on all horizons, consumer confidence has disappeared. When all went well, people thought things weren't true. Now, they don’t believe things are true. It is the other way round. Once was believed people could get richer by wasteful spending of money that wasn’t theirs, they now turn to their Government for financial support.
First it was thought this crisis was an economic recession that only should last a year or so, but this recession, now in its fourth year, is turning in a depression. The difference between the two is that a recession is temporarily, while a depression is structural. The world has too much production capacity from everything cars, electronics, houses, offices, you name it. Structural reform now is essential, reducing manufacturing capacity and affiliated activities. Innovative ways and innovative thinking have to be deployed to make the change cleverly, with minimal harm.
This crisis was caused by the central bankers mispricing the cost of capital, which resulted in misallocation of capital, driven by debt leveraging that ultimately became exposed as a hideous asset bubble which then collapsed, destroying the lives and livelihoods of tens of millions of relatively innocent people.
First Alan Greenspan and later Ben Bernanke were apparently unable to see this entire coming while it was so obvious: culminating in the collapse of housing and the blow up of the credit market.
Nonetheless Bernanke still gives to the view that if you make credit cheaper, you’ll boost economic growth. “(He) provided absolutely no proof that the Fed’s purchase of U.S. Treasury bonds and mortgage bonds in QE1 and QE2 did anything to promote growth in the real economy. All he’s done is boost stock prices and make it easier for the U.S. government to finance its deficits.”
“The Fed can’t ‘promote growth’ when households are reducing debt. It’s telling that Bernanke said the government needs to get fiscal policy in order (spending) for consumers and businesses to be more confident about taking risk.”
Our leaders apparently still don’t have a clear-cut solution! They just continue with throwing taxpayers’ money around. It seems they are in no hurry to put things right, they even don’t take time to investigate what really brought us in this mess, and don’t analyse the situation thoroughly to come up with an adequate answer. They only applied Keynesian stimulus packages that provoked corruption.
Politicians want to create jobs but don’t know that’s impossible. There is plenty practical wisdom around to learn from. But if you put people in charge that created the mess, don’t expect effective solutions, like Einstein once wrote, “Never expect the people who caused a problem to solve it.” Simply put; this economy needs to be restructured and not revived.
None of our leaders is able or willing to take bold and necessary decisions. They just apply the wrong medicine (money) and won't believe or listen to the few that could help. Mr. Market, and clever entrepreneurs are able to adapt to this condition of depression that will offer a contributive approach, while this process could take 10 years or more.
Austerity doesn’t work cutting spending, results in firing people increasing unemployment. Budgets are becoming even further of balance, with higher deficits. Decreasing GDP resulting in more economic misery.
Russian Kondratieff proved in the ‘30s that economic cycles are more powerful than government, while governments can alter the impact of a smaller "normal" bubble; they are helpless in the wake of a true "Super-Bubble." The real economic cycle is going to run its course, no matter what the government does.
Real prosperity can't come until all the "poison" of debt is out of the economic system. The result of underestimating these cycles is catastrophic, and a force much more powerful than any government can control. So the real economy will weaken.
For genuine recovery real money in the hands of people who can make it happen is required, in the hands of entrepreneurs, family operations, business people, but not the government. For an honest recovery let people keep their money so they can pay their bills, save, invest and spend, whatever they want to do with it.
Depressions are quite exceptional so no statistically reliable evidence and information is available. No general parameters do exist because this phenomenon is just too extraordinary. Hardly anyone still alive does remember the depression of the '30s and are able to recall the circumstances that then took place. A depression is not a break in an ongoing economy; it is the end of the economic road. It is a situation in which debt must be squeezed out of the system. In these circumstances bailouts, financial aid, and government stimuli packages are inadequate, in fact these hold back the process for recovery. Unfortunately this view represents a minority.
During the bubble era people spent too much borrowed money on things they didn’t really need. Once the credit crunch became fact, Policymakers thought money must be spent on whatever, just to creating jobs, growth and inflation.
However this situation is now becoming the “Bailout Bombshell” without solving the economic crisis that anyhow will turn in a depression. Tackling a depression as explained, requires other measures apparently unknown by our policymakers.
By Peter B. Meyer – June 17, June 2012
It is hardly possible to keep up with the accelerating events. Amazing how quick a government can waste €100 billion. Just days after the European Union agreed to float Spain's financial sector, the yield on Spanish 10-year debt breached the all-important 7% mark – its highest yield since the euro was created in 1999. Yields jumped after Moody's cut Spain's credit rating. For the record: Portugal, Ireland, and Greece were all bailed out after their government debt yields climbed above 7%. In Spain's case, this is the point at which the country will need another bailout soon.
The Spanish government may announce additional fiscal cuts and structural reforms. Bolstered by funds from the ESM, Spain remains financially afloat for several months. But the Spanish economy continues to deteriorate and unemployment heads towards 30%.
The financial world is watching with disbelief and shock as the European banking and political elites do the daily shuffle in a veiled attempt to hold together a forced, non-elected European Union. While it continues to come further apart at the seams due to excessive sovereign debt and failing austerity measures, rendered meaningless by an explosion in fiat currency creation, not seen since the days of the German Weimer Republic.
"The EuroTitanic has now hit the iceberg and sadly there simply aren't enough lifeboats." Says Nigel Farage, from UK Independence Party.
The next scenario: Violent protests against Prime Minister Mariano Rajoy’s austerity measures, will lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Likely another Guerra Civil, as the one of the thirties may occur.
Merkel cuts off further support for Spain, saying that hard-working German taxpayers have already done enough. In a hastily arranged mini-summit, Germany, Finland, Austria, and The Netherlands announce that they will not renounce the euro as their joint currency. This only increases financial pressure on France, Italy, and the other members. As the reality of the partial dissolution of the EU sinks in, the financial meltdown spreads from Europe to the United States and Asia.
Investors should study history and get ready for a fast replay of a new version of European history during1919, 1931 and 1933 that could transpire quickly over the next year.
Whether the effects of a worldwide depression will again be countered by another world war (WW3) is the only open question facing the world today. The failed European Union is going down. Of course the power elites will attempt to use the real or manufactured crisis as a pretext to expand the EU, but don’t believe they will succeed. The speed of events and flow of alternative news renders their old style propaganda powerless to keep up with and control public opinion today.
“We are indeed seeing a latter-day replay of the infamous Treaty of Versailles debt load forced on a defeated German nation in 1919 now levied on the entire European Union and this time Germany will be the winner. Maybe the turnabout is fair play but the long-term consequences could be as tragic as what the victorious allies did to a prostrate German nation that led to the rise of National Socialism and Adolf Hitler back in the 1930’s.”
“As was the case in 1919, 93 years ago, the banks and the power elite are seeking profits, gold and wealth at the expense of bankrupt and defeated nations but this time Germany is getting it’s revenge. In 1919, the victorious and "righteous" allied politicians that had earlier forced the United States to enter the war in 1917 in order to forestall a German victory so the American banks and arms industry could get their loans repaid and avoid bankruptcy, are this time on the receiving end. Germany might bailout the EU nations, at the last minute, but at the price of their gold reserves, control over economic policies and veto threat even over elections in the individual nations.”
“In May of 1931, the historic Credit-Anstalt Bank in Vienna, - now called UniCredit and based in Italy- founded by the Rothschild family in 1855, collapsed, - as will UniCredit do-. This in turn caused banks and companies across Europe to go under in a domino inspired panic. This collapse destabilized Europe far more than the Wall Street Crash of 1929 and over time destroyed European confidence and belief in political and financial institutions. The result was the rise in nationalism, fascism and ultimately World War II.”
“Americans don’t really know European history but the people of Europe do and this is why the elites are so determined to avoid another banking panic and collapse at any price. The problem for them is the expensive bank bailouts may well bring an even more destructive threat to Europe hyperinflation. Again, we know what happened in Germany.”
“The EU and the banking elites may well succeed in their efforts but the losers will ultimately be the sovereignty of individual nations and the wealth, freedom and prosperity of Europe. This problem will likely jump the Atlantic and an inefficient fascism like what took place in Italy combined with a nationalistic foreign policy like the German Reich does not bode well for the United States.”
Count on; European bank and stock exchange closures, private gold confiscation, limitations on ATM and bank account withdrawals and international wire transfers, that also will happen in the United States. The people of Europe and America will lose their wealth-security and preservation of purchasing power. Only precious metals and none exchange traded private equity opportunities will provide unique market opportunities.
Suggestion: Take action today and buy gold and silver, because this wil not end well for Europe or the United States.
Note: Many years later, Merkel, who has withdrawn from politics and become a recluse, is asked whether she thinks that she should have done anything differently during the EU crisis. Unfortunately, her answer comes too late to change the course of history.
Peter B. Meyer – May 14, 2012
Debt levels have to come down, but falling debt levels mean a contracting economy and more unemployment. That is the major issue and the rest is detail.
There are many unaddressed structural and systematic problems too grave to ignore that remain so despite the millions without jobs, savings, homes or futures. Our leaders let aggravate these crisis conditions while voters reelect them despite demanding change. Unemployed teenagers "face the risk of going from being unemployed to becoming unemployable." Today's reality is bleak. In short it is "a multi-faceted unemployment crisis that politicians, fail to comprehend, and to address. "The failure to agree on orderly debt reductions led to disorderly defaults, tariff wars and further worldwide collapses of production and employment in 1931, the last Great Depression.
Developed countries will find it very difficult to grow, as result of the enormous weight of debt, while most capital is “invested” in unproductive, zombie industries. Population growth remains stagnant. And important to recognize, much of the growth have already been materialized as the result from increased use of credit in the past to buy thing from the future. That future has arrived now.
Austerity doesn’t work. EU nations like Greece, Portugal and Spain tried it. They cut spending. They fired people. But they got nothing from it. Their budgets are still far out of balance, with deficits way above the 3% limit demanded by the European Union. Unemployment goes up. GDP goes down.
Actually living beyond your means is no longer politically or socially acceptable. You have to live within your means. The only question left, is ‘who will pay for all this debt’? The answers to that question are not easy. When debt levels were low, the answer was probably ‘future generations of taxpayers.’ At today’s debt levels it is unlikely that the debt will ever reach future generations. And with so much of the debt taken up by the central bank the burden shifts, from lenders to borrowers, to taxpayers and consumers.
Low interest rates are a kind of push around. They take money from savers and redistribute it to debtors. Borrowers, such as the big banks, get money at a preferentially, artificially low rate. While savers pay the price.
“Governments won’t be able to fulfill the promises made to their citizens. The grand bargain of the modern, social welfare state will begin to look more and more like a bad deal. Young, unemployed people will become increasingly fed up. They will look for radical solutions, while more radical leaders provide answers that most likely are wrong too. To be responded to by Governments with inherently reactionary answers in the best of circumstances, to finally react with repression, not too peaceably executed. Governments will cultivate their zombie clients, like the Ancient Regime did, by protecting them. The defense industry, for example, will probably successfully direct citizens’ rage against imaginary foreign enemies, and thereby increase its own power and wealth.
The Russian economist Kondratieff confirmed that economic cycles are more powerful than government. And that while the government can alter the impact of a smaller "normal" bubble, it is helpless in the wake of a true "Super-Bubble." According to Kondratieff, the government's act is a hopeless charade. The real economic cycle is going to run its course, no matter what the government does.
Real prosperity can't come until all the "poison" is out of the economic system. The result of underestimating these cycles is catastrophic, and a force much more powerful than any government can control. So the real economy will weaken. Revolution will begin. Finally, the middle class will be broke the poor were already broke and the country will be ruined by the Elite.
Eventually, the government you have counted on to "save" you can't even save itself. This is not easy to accept. Despite being in the back of your mind, most people will simply choose to ignore it, hoping it goes away on its own. Hopefully you are meanwhile smarter than that.
What should be done won’t be done, why do we suffer any longer with the EU that was already dead on arrival? How is it possible for a real recovery to take root in the hard, barren soil of falling house prices and slipping consumer earnings? The economy is not improving, and then there should be no increase in inflation, and no pressure on the price of gold, right?
A rise in the price of gold is associated with inflation. But gold is much more versatile than people think. It protects your wealth when paper money loses its value. It also protects your wealth when paper money gains in value. During the Great Depression, for example, the price of gold rose, against dollars, even though the prices of food, clothing and other consumer items were falling in dollar terms. Why? Money gains value, relative to goods in a depression. Gold is money. It is the best money. It is the only money that has stood the test of time.
Besides, there is more going on. In a financial crisis, or a depression, investors begin to doubt that their counterparties will make good. Banks fail. Investors go broke. You own a mortgage, and then you discover that the homeowner has left town, and the house has lost half its value. You own a note, and then you discover that the payer is bankrupt; your note is worthless. You own shares in a company; and then the company goes out of business.
When you are in a de-leveraging phase, you discover that many of the assets of the previous credit bubble are not assets at all. And while you’re waiting to find out, the best thing to have in your safe is gold. Gold coins that you’ve stored personally give you something whose value doesn’t depend on the health of the economy, doesn’t depend on any financial institution and doesn’t depend on any government policy.
As uncertainty rises; so does the price of gold. The price of gold also rises when the return on other assets declines. At 1.82%, the real return on a 10-year T-note is negative. Consumer prices are rising faster. So, the reward for lending to the government is less than zero.
Normally, holding gold costs you money. You give up the return you could get from ‘risk free’ investments Treasury debt. Now, you give up the risk from reward-free investments. Gold goes nowhere. It produces no yield. It pays no dividends. It makes no profits. You can’t live in it. You can’t drive it. You can’t hang it on your wall and admire it.
But when the return on Treasury debt is negative, what do you give up by owning gold? You give up a loss! And your Gold coins are portable, they hold their value no matter where in the world you might take them, and they are internationally recognized and accepted.
Tags: Austerity, Growth, inflation, economy, Europe, EU, IMF, debt
In my essay ‘EU Today and Tomorrow’ I wrote: “The failure to agree on orderly debt reductions led to disorderly defaults, tariff wars and further worldwide collapses of production and employment in 1931, the last Great Depression.” Today an article written by Bill Bonner about depression is worth the reading. It explains in detail the pros and cons about depression, and how the economy is repaired.
“Trying to fix a depression it is not only expensive.... The US government spends $1.60 for every $1 it receives in taxes. This is a recipe for a disaster, not for a recovery. It actually prevents a real recovery from happening, by blocking the market’s natural self-healing system.
The cure for a depression is a depression!
A depression reduces asset prices, consumer prices, and interest rates. This makes it possible for investors and business people to redirect their efforts on projects that will work. For example, a car wash may not be a good investment at $100,000. But at $50,000 it might produce good cash flow.
An investment may not make sense if you have to borrow money at 6% interest. But at 3%...the numbers work.
In an ideal world the price of labor falls too. You may not be willing or able to hire extra workers at $10 an hour, but how about at $5? Trouble is, the feds interfere with these self-healing trends. Minimum wage laws prevent employers from taking advantage of low-quality labor at low prices.
Unemployment compensation keeps workers from discounting their own labor. Zero interest rates and bailouts keep the zombies on their feet. Even in the best of circumstances — that is, in a free market — labor rates tend to be “sticky.” They don’t adjust quickly. With the CBs applying so much glue, it’s amazing if they can move at all.
But eventually, a depression works its magic. Prices fall. Investors are wiped out. Businesses go bust. The ‘destruction’ of the capital stock frees up both money and labor for new applications. The ‘creative’ part can begin.
Not this time. The feds have created darkness without a dawn. The glass is 100% empty. There are plenty of clouds, but no silver linings.
There are now more than 6 unemployed competing for every job. A normal recovery would see in the US the economy adding about 500,000 new jobs a month. Instead, last month it added 120,000 and economists hailed it as a major victory. Of course, it needs to create 150,000 jobs just to stay even with population growth. As it is there are 7 million fewer jobs today than there were in 2007... and the number of unemployed people is growing.
In 2007, just 10% of the unemployed had been jobless for 6 months or more. Today, the total is 40%. And with so little growth in the job market, many of these unemployed people will never work again.
What’s the problem?
Truth is, no one really knows. The simple explanation is that there’s a correction going on. But even before the correction, decent jobs were disappearing. The recession of 2001 was followed by the first “jobless recovery.” But every recession since the 1970s has been succeeded by a weaker and weaker recovery.
The feds don’t really have any idea why this is. Every politician and policy wonk suggests the usual remedies — more education, retraining and infrastructure investment. But there is no evidence that any of these things would really make the job picture much better.
The education industry has been a money pit. Huge amounts of money have been “invested” both by parents and the governments. It doesn’t seem to have helped the economy very much. True, a college grad is more likely to have a job... but only because he’s taking it away from someone without one.
The unemployment problem is a “tough nut to crack,” says The Financial Times.
Of course, we could fix the jobless problem overnight. But people wouldn’t appreciate it. We would simply remove all subsidies for unemployed people ... and all restraints on hiring. Labor prices would fall fast. Within days, we’d have full employment again.”
In fact the whole financial crisis would have been solved by now with less pain, as the Fed under Mr. Greenspan during the recession of 2001-2 applied the easy money policy to avoid depression. His Keynesian approach of money printing created the housing boom and bust and brought the global economy down initiating the financial crisis that begun with the Lehman Brother collapse, it was the beginning of the malaise as is known today.
The fundamental problem in the most troubled European countries is that the debt burden is growing at a faster rate than their economies are. Markets are losing faith in the economic viability of countries and soon will see the risk as too high to continue lending. This is the reason why sovereign debt has reached unsustainable levels within the PIIGS.
Direct and indirect bailouts have made the debt bubble bigger, bringing forth a strong possibility that these unsustainable levels of borrowing will force countries to leave the Euro zone. The default crisis will probably end up changing the makeup of the EU by the end of next year - a stronger zone with Germany as its backbone, could be a possibility?
Recapitulating, an economic depression is a good thing. It does away with bad investments and gets rid of bad speculators. It forces capital into more productive, more profitable applications. It kills off zombie industries. It retires worn-out industries ... and it reduces costs so that new industries can arise. It’s the ‘destruction’ that Schumpeter’s ‘creative destruction’ needs.
The more you think about it, the more you’re beginning to appreciate this coming depression. After rip-off bailouts and bogus recoveries, a depression would be something to look forward to.
Tags: Great Depression, depression, EU, Europe, unemployment, job losses, economy investments
By Peter B. Meyer – 14th of April 2012
As precursor for the next essay about what to expect from future developments caused by the financial crisis, here the review of my book published in 1996. Our leaders, as expected, did not heed the caveat offered. At that time trees only grew into heaven, it was stated: this time is different and past knowledge and experience were over due. As now – meanwhile 15 years later – the hard way is discovered, this was a great error, and for sure we people will pay for it through the nose.
"The Final Wake Up Call is just that! Author Peter B. Meyer makes it soberingly that, unless we, as responsible adults, take action now, the impact on our children, the future generation will be irreversible and nothing short of disastrous.
What impact? The answer is ominously wide reaching, including socioeconomic, education, cultural and environmental. What makes Meyer’s message particularly hard-hitting is that this is no mere theorising but comprises hard facts supported by statistics and references taken from professional journals and reports.
For example: The family is the foundation and cornerstone of the very structure of our civilization. No other institution in the last three decades has been neglected as much as the ‘nest’ where our children are born, cared for and educated.
With single parent families increasingly becoming the norm, what impact is this trend having on children? The answer is frightening, still more when economics are considered.
Although the book covers several distinct social and economical areas, the welfare state with its ‘cradle to grave’ subsidy programs is blamed, at least in part, for the widespread bankruptcy among governments in the industrialized west. The public should be clearly explained the urgent necessity of a ‘self help’ economy – in which personal initiative and care are the main ingredients – that should replace the former one.
No longer can we support, or afford such subsidies Meyer states, yet few politicians it would appear have the courage to make a stand and shake-up the system. The answer is surely for Europe’s leaders to agree on a common strategy – a determined reduction and reform effort that, although hard to accept initially, would undoubtly prove to greatly ease the national debt(s) and reduce unemployment in the long run.
Training schemes, incentive programs and deregulation of archaic labour laws are other suggestions, which would certainly ease the plight of the jobless. Throughout the book, the author not only sets the scenario, gloomy as it may be, but thankfully also suggests the remedy as well.
Based on his own educational background and entrepreneurial awareness, Peter B. Meyer also suggests a series of reforms designed to shake-up the current stagnant school system and better prepare our children for the increased competition of the information Age. Many seem plain common sense, yet how many educators, for example, teach their students about the world of the work place by simply inviting working individuals, both professionals and blue collar, to share some first hand experience with the young? Meyer takes this concept a step further by suggesting how business should have a major say in how youngsters should be prepared for their job in industry, while providing donations for upgrading the level and quality of education.
Fortunately, Peter B. Meyer does not leave the reader guessing but consistently offers sound, practical advice, which could be adapted on a broad scale ‘if the right people take note’.
As he continues to stress: it is up to you now, the reader, to spread the message and help change course. It is no secret that we are heading for catastrophe but there may be just one more chance – a final wake up call which will breathe life into the world suffering from the after pains of greed and excess. For the sake of out children, he urges us to take action now and, better still, tells us how to go about it…!"
It is disappointing that often-visionary views are ignored; the crisis could have been prevented if proper measures were taken and implemented before 2002.
Unless the people soon revolt to tell their leaders to urgently stop with this circus of money printing, and to plug one hole with another with their so-called bailouts, with the only result that our society will further deteriorate, with the consequences the suffering is getting worse every day more. Better to make a U- turn now than to continue until the politicians hit the wall with hyperinflation. Count with the fact that the latter eventually will be the result. The governments literally financially strip the citizens naked by inflation; as a result your saved money will disappear like snow in the sun. Now buying gold and silver coins is the simplest thing you can do to protect your wealth against this theft.
Currently all is perception after the fact for most of us, but what is coming our way is even worse as one may be able to imagine. The boat – Ship of Sate - has hit the rock and is sinking; everyone should heading for the lifeboats for survival. Be convinced that few will do it, as people think it won’t be so bad as said. Prepare for the worst and hope for the best. Read the next essay: THE LAST WAKE UP CALL that shed some insight about what is ahead.
Tags: Last wake up call, Peter B Meyer, EU, money printing, Euro, economic crisis