News & Analysis
Will Euro Failure Usher in World Currency?
German-Irish brinkmanship raises EMU stakes ... German bail-out fatigue and fierce resistance to EMU "rescue creep" threaten to derail a eurozone deal this month, and risk triggering a fresh round of Europe's debt crisis. The EU's new criteria for bank stress tests to be agreed this week adds another risk. Ireland's new leader Enda Kenny faces a daunting task as he tries to change the terms of his country's €67bn (£57b EU-IMF package, either by cutting the penal rate of interest or changing the remit of the rescue fund to help Ireland claw its way out of a debt trap. – UK Telegraph
Dominant Social Theme: So much to muddle through. The EU will survive.
Free-Market Analysis: The Telegraph's Ambrose Evans-Pritchard has published one of his usual insightful analyses on the upcoming difficulties the Irish will face in renegotiating debt payments to prop up failing Irish banks (see article excerpt above). Irish bank bonds are held by German and French banks, among others, and there has been overwhelming pressure placed on Ireland ‘s government to borrow money, raise taxes and cut expenses so as to ensure the ailing banks do not founder entirely.
The stresses placed on the Irish economy and Irish taxpayers in particular are tremendous. Iceland chose not to support its insolvent banks and as a result the Icelandic economy has show some improvement; the Irish economy still lags badly and there is no expectation that it will much improve; in fact it is likely to end in a kind of national bankruptcy or popular rebellion.
For this reason, the Irish turned to the country's main opposition party, Fine Gael, in recent elections to provide a clear alternative to what has already been agreed upon with the EU. Nonetheless, as Evans-Pritchard shows, there are grave obstacles in the way of renegotiating an agreement with the EU that provided bank bailout money to stabilize Irish finances last year.
Much of the problem with renegotiating the current, likely unsupportable, agreement lies with Germany itself. Most recently it has been suggested that the EU could issue "eurobonds" that would considerably ease the financial crunch that countries like Ireland face. But Angela's Merkel's three-party German coalition is opposed to the eurobond idea, Evans-Pritchard reports, because ultimately all EU countries would end up guaranteeing such bonds. The coalition intends to put any agreement reached by the EU to a vote in the Bundestag. More than this, "A group of 189 German professors has [warned] of ‘fatal consequences for the whole process of European integration' if the EU crosses the Rubicon to a de facto debt union."
"I cannot remember any occasion when lawmakers have set guidance like this before: Merkel has very little leeway," Pritchard-Evans quotes Hans Redeker, currency chief at BNP Paribas as saying. "There is going to be disappointment at the summit and that will make life even harder for the EMU periphery." Meanwhile, an oil spike will considerably reduce EU growth and make the Irish economy (among others) even less responsive. Such "peripheral countries" are most at risk from exogenous financial difficulties.
Merkel's administration has an alternative plan to offer Eurocrats. In return for expanding the bailout pool, those recipients of aid will agree to an intrusive EU (German) regulatory and inspection reign. This has already met stiff resistance from the Irish and others. Resentments from World War II are still evident, especially in such countries as Greece, and the perception is that Germany is trying to use its financial clout to gain in peacetime the European empire it could not claim long ago by war.
The European Commission, Evans-Pritchard points out, has drafted a compromise plan, but in Germany, already, it is seen as more of the same. Outgoing Bundesbank chief Axel Weber – a vehement critic of any agreement that would further enmesh Germany financially into third-party bailouts – has attacked the plan, claiming it would eventually resolve itself into a move toward a eurobond program. Germany's views on this matter are increasingly shared in Holland and Finland – other so-called "Northern" states that are considerably more solvent than Southern ones.
Ireland currently pays nearly 6 percent for EU loans, versus the EU funding cost of 2.6 percent and there is no guarantee that the carrying costs won't rise as the EU gradually continues its recovery from the 2008 crisis. Evans Pritchard believes the new Irish regime has one considerable weapon in its arsenal, which is to "threaten 'haircuts' on senior bank creditors if the EU refuses to compromise, a move that might set off EMU-wide contagion and inflict big losses on German Landesbanken." To play it, he concludes, would encourage the wrath of the eurozone. To allow the situation to remain as it is will reignite the wrath of the voters that the just handed a resounding defeat to the previous regime that negotiated the current bailout terms. The alternatives could not be starker.
Evans-Pritchard's analysis ceases with the observation of the various alternatives. But we want to suggest a fourth option here – one that no respectable mainstream publication would likely speculate on. Our idea is that at this point the euro is actually being set up for failure. The current dilemma may be no accident and is in fact perfectly predictable. We have argued in the past that the eurozone is an integral part of the Anglo-American power elite's plans for closer global governance. But the EU itself has harmonized much of Europe's regulatory disparities and in a sense, even without full political power, has turned the Eurozone into a homogenous whole.
It may be that the euro itself is expendable at this point. The idea would be, of course, that as the euro continues to falter, an alternative currency must be waiting in the wings. The Anglosphere has such a currency available in the IMF's SDRs, which can be resolved into an even more fungible currency called the "bancor" as economist John Maynard Keynes suggested 50 years ago.
While this may sound somewhat unrealistic, to say the least, we would argue (as Devil's advocate) that it is sociopolitical and economic chaos that drives sizable economic changes. Is such chaos looming on the horizon? It seems to us that the power elite has already begun to inflict it on the world, creating regime change throughout the Middle East and Africa. We've covered Western culpability in this regard in numerous articles. We would argue that any elite capable of setting off controlled revolutions in a dozen countries is certainly willing to introduce similar chaos in the West.
What signs to do we see? We think that Western central banking policies may have deliberately introduced raging price inflation in developed and developing countries. We believe the sudden advent of food scarcity (to be followed by water scarcity) may be no accident either. All these factors are controllable via money power and we it would seem to us, arguably anyway, that this controlled – and expanding – chaos is meant to be.
In America, Barack Obama has added trillions to the national debt and made George W. Bush's profligacy look almost modest by comparison. Again, we believe that this may be a deliberate destabilization of the nation's fiscal and monetary situation. Homeland Security's authoritarian depredations are acting as deliberate incitements as well. With 40 million on food stamps, 20 percent unemployment (at least), mounting price inflation, failing wars, 10-percent foreclosures and a polarized political environment, we would tend to believe that America is on the verge of the kinds of civil disturbances that Europe is likely to face as the weather warms.
It is not the civil unrest itself that will make the difference but the inflationary decline of the dollar reserve system. The combination of monetary destabilization, social unrest and military tension (the West versus the growing "threat" of a (controlled) faux-militant Islam) could create the necessity for a grand G-20 compromise that could usher in a new monetary environment administered by the IMF under the auspices of the UN. At that point, all that would be needed to create a UN-driven "new world order" is a taxing authority, something the UN has been suggesting with increased enthusiasm for the past several years.
Conclusion: Certainly all the above sounds radically speculative but we have been astonished at the boldness – desperation? – of the power elite's depredations in the past few years. Destabilizing a quarter of the world is apparently not beyond it and we would not put it past this shadowy cabal to purposefully begin to destabilize the euro as they have evidently destabilized the dollar. China has all but broken away from the dollar-reserve system in the past months and Russia shall not be far behind in our opinion. We do not yet foresee the exact mechanisms that might resolve themselves into a new monetary system but in this article we have done our best to pursue the issue logically. Far-fetched? Sure. But no more than many other events occurring in the world today.
Posted by Noel on 03/08/11 01:21 AM
This IS SO TRUE ITS all Biblical!!
Posted by Gunter Geiger on 03/05/11 02:48 PM
Locig is good, separating facts to day from tomorrows fiction would be better tool separating the key issuesreducing the text in half would make more impact and more readable,hence the facts would stand out now they are lost, and who has time to read 10 newsletters, therefore the reader will stick to the once that have this criteria....plus a checklist of what to do, follow up and gard for. The reader winns, the author winns the newsletter winns, with half the space and focust issues.
Posted by Bob Bbq on 03/04/11 09:24 PM
The EURO is not disappearing just yet. USD was 1.38 EUROS in Apr-Jul 2009 and Jan 2010 and Apr-Sep 2010 and again today - Events in the Mideast or elsewhere or moves by China or moves to impeach Obama may not be sufficient to kick the USD out of this range.
Click to view link
Posted by ISA on 03/04/11 05:43 PM
DB and all, you should check this website. Will appreciate your comments.
Click to view link
Posted by Ralphus Lucius on 03/04/11 04:22 PM
The best laid plans....
While the PE has crafted the present international monetary framework " augmented by diverse political control, too often overlooked is the fact that central planning schemes rarely end well, but rather, ultimately tumble into chaos.
Doutbless, havoc is wreaked on a vast scale. Governments fail, millions suffer and die, profits are reaped and the Ponzi scheme expands and survives. The PE seems to count on the fact that human behavior is predictable enough ' and almost all contingencies can be covered.
But wait, PE, there's more. While the adaptive nature of humankind plays right into PE hands, there remains the strongest human instinct of all ' survival.
The American populace may have softened over the past many decades of ease. But imbedded in American culture is the lone wolf who survives against all odds, and beats the power mongers against impossible odds.
UN control? Bancor? Americans begging for a master to rescue them from economic disaster? Maybe easy enough to pull off with submissive, hierarchal cultures in many areas of the world ' but never in America.
We are 300 plus million people with at least 400 million plus guns. We have vast, fertile land expanses where small, private vegetable gardens can pop up like dandelions overnight. Many of us have hoarded gold and silver coins, extra food, seeds, garden tools and supplies.
The survival business has been brisk for many years. We are also very community oriented and tend to band into tight, mutual self-help groups in good times and in bad. In spite of a growing drug culture, most of us remain cold stone sober. And to a fault, we are generous with each other.
In our genes is a will to risk and overcome. After all, our ancestors were primarily immigrants that bravely forsook their homelands, and against tough odds, were willing to suck it up and forge a future for generations to come. From the Africans that were brought involuntarily, only the strong survived, and their genes too have been passed on.
Much has been overstated regarding the effect of a biased media, a decadent pop culture, and a decline in public education. The apathy and ignorance that seems rampant in our culture makes us look like sheeple. And sure, a segment of us have adopted an entitlement mentality, wearing the mantle of victimhood as a crown. But make no mistake. We are wolves in sheeple clothing.
Fact is, most Americans are highly independent individualists who hold tightly to the concept of human liberty. Try as they might, if the PE truly believe they can pull off the end game, they are in for a rude awakening.
My contrarian view is that a massive financial collapse will be a good thing. Not only will we survive, we will learn, grow and be better than ever for it. So I say to the PE, push the re-set button. In so doing, you are going to learn the real meaning of the law of unintended consequences.
Posted by Reader on 03/04/11 01:55 PM
It is not a deliberate destabilization. The destabilization is an aside " a consequence of QE1 and QE2 " because the original and true reason for QE1 and QE2 was to help the Investment banks in NY who lost money in Real Estate...
The basic problem faced today is a Tyrant called Government. It is in Debt, it has to make massive interest payments, it has a deep-seated fear of default and it has a huge defense budget and modern police technology at its fingertips. What this means to Traders of the world is that the world is facing a government that is perpetually hungry for cash (to make those Chinese interest payments) and who can be expected to covet other peoples wealth.
And this finally explains all " the fact that the Tyrant has attempted to confiscate Middle East oil wealth by launching a CONFISCATION war on a convenient pretext and the fact that it has blackmailed foreign governments to reveal numbered bank accounts of its own citizens on flimsy pretexts of tax evasion.
In the future, it can be expected that this government has plans to turn inward against its Citizens by instituting an unending series of Taxes and other new, inventive and otherwise Draconian CONFISCATION LAWS.
I conclude the The ROOT CAUSE of the Tyrants problem is his DEBT LOAD owned to Foreigners. This is the MOTIVE FORCE FOR ALL HIS ACTIONS " overseas or at home. The Free Market, and Global Traders, seems to know this instinctively... but who will dare educate such a beast?
Posted by Eric on 03/04/11 03:22 AM
" ...a grand G-20 compromise that could usher in a new monetary environment administered by the IMF under the auspices of the UN. ..."
Granted monetary destabilization can drive social unrest, but I fail see both working together to justify the creation of SDRs with IMF/UN taxing authority. That sounds like statist wishful thinking.
Monetary destabilization results in flight of wealth to safety. The SDR "basket of fiat currencies" does not engender confidence in a future where the dollar and/or euro are failed currencies. And social unrest results in loss of centralized control with the potential for regime change (total loss of control by old regime). Monetary and social instability does not foster a move towards acceptance of greater authority, if there is any change it would be to reject national and international authority in favor more regional autonomy and self control. The breakup of the USSR, the breakup of British colonial empire, the recent icelandic revolt ... these are better models of what is likely to happen.
Posted by ISA on 03/04/11 12:02 AM
Whatever currency or set of currencies (SDR) the power elite is going to adopt, I believe that the gold standard is inevitable since it is the only way to establish and stabilize the worth of paper monies.
But this would require an international authority or a WORLD GOVERNMENT, like the UNITED NaTION vested with POLICE/MILITARY POWER, and a WORLD BANK/IMF/WB/BIS (both under the influence of the PE) which alone would be vested with the power to adjust gold valuation from time to time.
But as I posted earlier, this can be done only by the confiscation ' (acquisition by force of law by governments by buying at confiscatory price USING FIAT MONEY) " of gold from private holders, but NOT from the world's monied and political elites who are the real force behind governments, first from the American people by the US government to be followed by all the governments of the world.
According to wikipedia, central banks and investment funds held 19% of all above-ground gold as bank reserve assets. It has been estimated that all the gold mined by the end of 2009 totaled 165,000 tonnes. At a price of US$1000/oz., exceeded in 2008 and 2009, one tonne of gold has a value of approximately US$32.15 million. The total value of all gold ever mined would exceed US$5.3 trillion at that valuation.[note 1]
The gold may then be re-issued to back up paper money but re-valued as many times its acquisition cost as needed to cover the current value of all kinds of paper money in the world.
This approach maybe the only way for the US to PAY OFF all its debts, foreign and local, of some 14 trillions US dollars if it can get hold of the world's physical gold USING ITS CURRENT FIAT MONEY.
Posted by John Blenkins on 03/03/11 09:32 PM
Mother nature in 2010 must of been, commodities dealers wet dream
and a perfect time for the PE to ratchet up food price inflation.
The Russia wheat failure of last summer quickly followed by Pakistanis
floods.Coupled by fast rising soft commodity prices I sent several
posts last sep/oct warning the six month lag in prices would really start to bite
come spring.Speculation exacerbated by genuine weather induced crop failures world wide.Watching the autumn riots across Europe knowing
austerity cuts had a lot further to go and food prices up dollar/euro
down. Fairly good recipe for further riots come spring.I speculated
to add oil to the mix would squeeze even more on all but the few.
Could not see how the middle east would ignite as it did out of the blue to spread so fast and wide.Yes the CIA/MI6 no doubt up to all sorts of funding and incitement of dubious factions. Stirring up a smouldering resentment by a largely educated youth looking at no prospects living in a police state.The spark in my view was food
price inflation biting hard on the many poor whose meagre means are mostly spent to eat.I think the resentment across such a large cross section of a sick and tired society looking for liberation does not in the short term at least look promising for radical Islam or the
CIA/MI6. No doubt they will need more funds as all extortion rackets do.The west I'm sure were caught on the hop by Tunisia,Egypt.
Once sniffing the true public resentment the west has dropped its
well paid for stooges like a hot potato.All this chaos is milk and honey for oil speculator's grabbing hold of skyrockating prices.
that will further add to what you can actually buy with worthless script.By the way meat prices must go through the roof in the next
1-2 years as that's the lag time from birth to table for pigs and beef and the feed costs have risen something like 80% in a year.
South Korean being a large meat producer in the region has lost 25%
of its pigs and cattle to foot and mouth recently adding more pressure in the area.
If 2011 is anything like 2010 weather wise food price inflation can only keep going up.
Boy the PE win all way round.As a bonus most of north Africa departing dictators ill-gotten gains billions are in western banks and assets.Anyone like to wager it will ever go back to the countries from whence it was stolen. For the rest its a downward spiral
along with the falling currency, QE3 smouldering of the presses.
The link to the first post is spot on as others have said.
Posted by Vauung on 03/03/11 08:14 PM
@ Jack Maxey
"It appears that the desperation displayed by the PE is prompted by the haste to move events along to concide with the occultic 2012 time/date." -- interesting suggestion. Is 2012 apocalypticism a surreptitious elite promotion? Playing with eschatology is certainly high stakes poker. As you suggest, the timing of the great meltdown seems intriguingly coincidental, to say the least.
Posted by Paul on 03/03/11 07:12 PM
On a different subject....I just had time to see Anthony Wile's interview with "Russia Today", and I must say it was brilliant! It is a sad commentary, however, that an interview like that was on Russia Today and not on any U.S. news network (FOX). Maybe because it hit to close to home......Of course, it will probably get more views on YOU TUBE.
Posted by Gabe on 03/03/11 06:53 PM
The Cult of Malthus grabs the brains of it's members rather strongly. They seem to fear the converging lines of two equations so much that they will grasp onto any proposed "solution" no matter how tyrannical and without regard for who is proposing the solution.
Please remember that while yes "a physical resurce within a defined volume is not infinite". It is still possible to change a waste by-product of kerosene such as "gasoline" into a "resource" with a little human innovation. There are many problems that even Malthus could not predict that come with growing world population from 1 billion to 4 billion and then to 8, but they were all solved. Know one person could have explained how it all would happen in 1700...yet I am thankful that the fearmongering at the time didn't bring about a worldwide human breeding program regulated by one or two czars.
Having a system that puts a high value on scarce resource via well defined broadly respected private property rights is a good way to solve many human problems.
More taxes and more taxing power is a direct attack on well defined broadly respected private property rights . It leads to the destruction of civilization/famine/despotism/genocide/hell.
Posted by Bionic Mosquito on 03/03/11 05:39 PM
DB: "The reading was naive."
Fair enough. Sometimes I can't help myself on certain subjects, or when comments like this are posed in such an arrogant manner....
Posted by David Robertson on 03/03/11 05:27 PM
"It ain't what ya doesn't know that hurts ya. It's what ya knows fer sure thet jest ain't so". (Uncle Remus in Song of the South).
"Life is what happens to you when you're busy doing something else." (John Lennon)
"There are more things in this world than are dreamt of in your philosophy Horatio" (Hamlet).
"The best laid schemes o' mice and men gang aft agley" (Robert Burns in Ode to a Mouse")
"In his heart a man plans his course, but the LORD determines his steps." (Proverbs 16:9)
Posted by Bionic Mosquito on 03/03/11 04:37 PM
@R. Stephen Dorsey
"Food scarcity and water scarcity are controllable with enough money?"
Depends how you define "money"? As printed by central banks today, no, as Adam so well points out (if you are able to answer his questions honestly).
There is no better system to organize mankind toward delivering the wants and needs of his fellow man than the free market, regulated by profit and loss as well regulated by acceptance or rejection in the market of any proposed product.
Prices, freely arrived at, are the key to ensuring that resources are identified, developed, and delivered to their highest and best use. This (along with property rights) is the key to ensuring any shortages can be met in the most efficient and rapid manner possible.
"So infinite population is possible?"
I did not read any such assertion. The truth is the market will both find the population that can be supported and deliver the means of support...if left free to do so. and, as has been true throughout history " despite the interference in the free market " in general the earth has been able to support more people over the time captured by recorded history.
I imagine it would have stunned someone on the North American continent to hear news that within a few centuries he would be surrounded by 400 million or more neighbors. Or the idea of a city of ten million, of which there are today many on this earth....
Just because you cannot imagine it does not make it breathtaking. You should thank God for your fellow man, for the fact that your fellow man has delivered wonders of life that you have absolutely no ability to produce yourself, and also apparently beyond the comprehension of your friends.
Reply from The Daily Bell
The reading was naive. It is money power that is likely CREATING the food and water scarcity and doubtless will continue to do so.
"What signs to do we see? We think that Western central banking policies may have deliberately introduced raging price inflation in developed and developing countries. We believe the sudden advent of food scarcity (to be followed by water scarcity) may be no accident either. All these factors are controllable via money power and we it would seem to us, arguably anyway, that this controlled " and expanding " chaos is meant to be."
Posted by WD on 03/03/11 04:11 PM
I can't help but notice a conversation taking place here on two levels. One practical and concrete, and the other religious, the religious crowd, being the alchemists of reality while the practical crowd does its best to deal with the concrete. I can't help but wonder if religion was created to distract the victims from a concrete defense.
Posted by Helvena on 03/03/11 03:36 PM
Brooks Adams wrote:
"Perhaps no financier has ever lived abler than Samuel Lloyd. Certainly he understood as few men, even of later generations, have understood, the mighty engine of the single standard. He comprehended that, with expanding trade, an inelastic currency must rise value; he saw that, with sufficient resources at command, his class might be able to establish such a rise, almost at pleasure; certainly that they could manipulate it when
"it came, by takeing advantage of foreign exchange. He perceived moreover that, once established, a contraction of the currency might be forced to an extreme, and that when money rose beyond price, as in 1825, debtors would have to surrender their property on such terms as creditors might dictate."*
*Brooks Adams, The Law of Civilization and Decay, New York, 1896. New York: Vintage Books, 1955
Posted by Turbomango on 03/03/11 03:08 PM
With so many already awake against the few empowered by our own shameful silnce and inaction, it is mindboggling. Why of us who see just sit back and do not organize and take action on this very subject of the coup? Our numbers are big enough to make the difference now. Why are we sitting back and just complaining and leaving it the prohetics of the Bible? Tne Good Lord gave us a brain, a voice and motion, yet we sit idle and coward beneath the wrath to come. What is wrong with humanity that all we wish for is to run and hide? We know, we have the power and yet, we are afraid. Makes me sick.
Posted by Bill Ross on 03/03/11 02:18 PM
"Pope Benedick forgives the Jews for killing Jesus Christ"
Seems to me this is the same wrong that I indicated above. How can any but the victim forgive the aggressor? Forgiveness is the property of the victim, as is CHOOSING to get indebted the property of the borrower.
Just because they glibly state "good motives" does not make it true. You will know them by what they DO.
Seems to me, the law, with their concept "pardoning" criminals without the courtesy of full compensation to victims makes the same mistake. So, crime does pay, for those who pretend to deal with it and their buddies they "pardon" or do not hold accountable in the first place.
Posted by Patrick O'sullivan on 03/03/11 02:14 PM
WHAT DO YOU MEAN BY"THREATEN HAIRCUTS"