STAFF NEWS & ANALYSIS
Soros Demands Inflation
By Staff News & Analysis - June 24, 2010

Soros tells Germany to step up to its responsibilities, or leave EMU … Legendary investor George Soros (left) has called on Germany to leave the euro unless it willing to embrace a growth strategy, describing Berlin's austerity doctrine as a threat to democracy and political stability in Europe. Mr Soros saw the political effects of wage cuts first-hand during the Great Depression, and narrowly survived the Holocaust as a Jewish boy in Nazi-controlled Budapest. He has since dedicated much of his wealth to philanthropic works promoting freedom and pluralism across the globe, mostly through Open Society institutes. His comments reflect growing alarm in influential circles on both sides of the Atlantic over the 1930s-style policies of wage cuts and debt-deflation being imposed up the Club Med bloc, Ireland, and parts of Eastern Europe by the EU authorities, at the behest of Berlin. – UK Telegraph

Dominant Social Theme: We need to protect the poor from German depredations.

Free-Market Analysis: This fits into one of our observations – that the EU has been using the threat of deflation as a way to promote "austerity," which is actually a way of further impoverishing and controlling what is left of the European middle classes. But we have also observed that those in charge of the EU and standing behind the EU are likely making a big mistake by pushing so hard to consolidate the EU's authoritarian grip. We have written many times that the fractious tribes of Europe are much better at putting up with the nonsense of regulatory democracy during good times than bad.

It is our suspicion, which we've stated many times, that too much austerity will backfire on the EU. Those leading the EU, and those standing behind the leadership, are certain that Europe will in some sense swallow the stiff medicine being spooned out. We cannot fathom this level of confidence, and in this sense (worryingly so?) George Soros seems to agree with us. Here's what we wrote recently about EU deflation and austerity:

We believe, indeed, as we stated above, that the idea that citizens of Western nations must now submit to this sort of austerity so that money center banks can maintain solvency is verging on the immoral. Central banks have deliberately inflated for decades to ensure that people would accept the system and support it. But now that the system is literally disintegrating – as fiat money systems always do – the same powers-that-be are marshalling their allies and the mainstream media to declare the immanence of deflation and the beginning of long term "austerity."

To read the full article, click here: Deflation is Good.

We are not quite sure why George Soros is speaking out now. We are not privy to the inner workings of the EU but we cannot conceive of a situation where Germany is giving the EU its marching orders. If the Anglo-American powers-that-be want less austerity and more inflation, then they will do their utmost to impose their will on the matter and Germany be damned.

From Soros' plaintiveness, therefore, we can derive several suppositions. First, to generate a trillion-dollar-plus bailout of Southern Europe, political reality really did allow Germany to dictate terms (ie: austerity). Second, the sovereign crisis has a mind of its own and larger economic environments are not inherently controllable – and the current bout of price deflation may not be avoidable no matter how much the elite wishes to stimulate. Finally, perhaps we are wrong and the elite does NOT want to use the current crisis to impose dramatic austerity measures on Europe.

We think the first two suppositions are realistic. But we are not so sure about the third. We DO think the elite intended to impose political conditions on Europe using an inevitable currency crisis as a pretext. And "political conditions" include a prescription for austerity measures in our view. Therefore, Soros' almost panicked remarks may indicate something of a rethinking on the part of those who have intended to implement post-crisis European policies.

The Bell is organized around the analysis of dominant social themes. We have seen the imposition of austerity and the constant chatter about deflation as a kind of fear-based promotion intended to justify the cutbacks and tax-hikes going on across Europe currently. We also believe that sooner or later Europe and in fact the whole of the Western world is due for a good deal of inflation sooner or later, if not hyperinflation. But not just yet. And maybe there's the rub.

The trouble with analyzing dominant social themes is that they can be interpreted in numerous different ways. We have no idea of the direct relationship of George Soros to what is evidently and obviously an Anglo-American power elite that does it best to control sociopolitical and economic events. It is also possible that Soros is making the statement for his own purposes. Perhaps his pocketbook and trading stances would benefit from euro growth. Heck, perhaps he has decided to go long the euro. Who knows?

After Thoughts

But if Soros is in a sense a messenger for the elite, then his concern over austerity becomes a notable occurrence. It means the elite themselves may have become concerned about the economic environment and the political reaction to it both in Europe and America. We simply cannot imagine that those "in charge" of the EU experiment are sanguine about the kind of tax hikes and public sector cutbacks that are now taking place. The entire social contract of the past 50 years is being overturned, and quickly. We know that many disturbances, especially in Greece, simply aren't being reported anymore. But they are occurring and elsewhere to. And this is just beginning. If the elite has become concerned, we are not surprised.

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