Europe will lead the world into Economic Totalitarianism because government is now desperate to retain the euro. If the euro collapses, so will Brussels. The government exists solely because of the euro.
The key is the fatal design of the euro. Failure to consolidate the debts of all individual member states has been the worst possible mistake perhaps ever made in this post-Great Depression era of New Economics, where government lawyers assume they can just write a law and it will be followed, as if they were some new modern dictator.
Because of the failure to consolidate the debts, the reserve of the banks had to be politically correct to conform with Brussels, holding a piece of all member state debts. That meant that the defaulting in part or in whole of individual sovereign debts of member states undermined the banking system. This would be as if in the U.S. bank reserves were made up of state debts. If one state failed, everyone would scramble to sell to the banks who had the most.
Since Brussels will not reform, as Einstein correctly put it: “You cannot solve current problems with current thinking. Current problems are the result of current thinking.” This whole idea of negative interest rates is just following the same Keynesian concept that lowering rates will stimulate demand. The missing element is CONFIDENCE. If you do not believe you will make even 1%, you will not pay 0%. While they keep lowering rates to stimulate borrowers, they are wiping out the elderly who now cannot live from their savings, reducing their spending, and destroying the entire idea of pensions and retirement (the social contract). The lack of CONFIDENCE prevents new businesses from forming and therein results in the lost generation of youth who cannot find a job. The elderly are forced to work, so there becomes a shortage of jobs, resulting in higher unemployment among the youth.
Add to that trend wiping out the elderly and the youth, we then have the rising tensions against foreigners everywhere because they see them as taking precious jobs as they migrate to their country. It becomes a vicious cycle that cannot be broken with the same line of thinking.
This is why governments are still using the same line of thinking of negative interest rates and going to the next step. They cannot meet their budgets as tax revenues decline with economic activity, so they go off hunting money causing the global economy to shrink even more. As they hunt money, people hoard and invest even less. They tend to buy assets to get off the grid. To further this effort, governmental thinking then arrives at the solution to eliminate cash forcing the end of the underground economy and 100% tax collection.
However, Brussels knows they have a real crisis in European banking. However, this crisis is monumental and cannot be solved with the same line of thinking that has caused this insane nightmare. Obviously, eliminating cash will prevent people from causing a bank run if a member state defaults. The smart money is trying to get out as fast as it can by buying rare art, coins, stamps, antiques, real estate, etc. This is the only way out, for when they eliminate cash, chances are they will impose CAPITAL CONTROLS and prevent the movement of money out of a country. This line of thinking will lead to this traditional next step.
So in the end, governments (not the Rothschilds) are in a fight for their very existence. They will incite civil unrest, set to rise sharply between 2015.75 and 2017. We also have to be concerned about the outcome for November 21, 2018, which will be the pi target that on previous waves produced 9/11 in New York and the very day of the Greek economic crisis in 2010. Geopolitically, Obama undid everything that was done to make the world safer. He ruined the European economy with his sanctions against Russia, and created the alliance that now exists between Russia and China in military action and drills. The USA might be able to defeat Russia on a conventional battlefield, but they cannot defeat China on the same terms. Meanwhile Germany, the strongest economy in Europe, is constitutionally forbidden to have a big military force. Brussels is now talking about trying to form a European army to further their power. It is all posturing to insanity.
Brussels will lead the charge to shut down cash as we know it. We are moving into the next stage of massive deflation that I have been warning about – not HYPERINFLATION. Government are moving to control everything; you will not be able to buy or sell anything without government approval. The Economic Totalitarianism I have warned about is on the horizon.
The next step in the game will be CAPITAL CONTROLS. When the European government realizes that they cannot eliminate cash without the rest of the entire world doing so simultaneously, money will move out even faster from Europe, driving the dollar to excessive highs. They will most likely follow the same script as they did in Cyprus, imposing currency controls to prevent money from fleeing.
The only way out of this mess is the real fight – changing the thinking process. As I have said many times before: HYPERINFLATIONISTS are dead wrong and we will PRAY FOR INFLATION before this comes to an end. We are in the meltdown mode of Western Civilization, all because of debt, and lawyers controlling government who think they can be dictators by just writing laws.
If you understand the nature of the beast we are fighting, you will NOT be surprised and can learn from history; even though we are compelled to watch others repeat it.
No single country’s currency can really be the reserve for what happens is clear right now. The US lowered it rates to fight the banking crisis and that began a contagion externally. Whatever the US might do with respect to monetary policy for its own economy cannot be isolated purely for domestic use.
QE1-3 produced no domestic inflation because DEFLATION was global and the money was absorbed externally. If the dollar was not the reserve currency, then that policy would have produced inflation as the Austrian School taught. That principle does not apply to empires whose currency is used externally.
The entire problem with cryptocurrencies is the fact that government has ALWAYS profited from creating money known as Seigniorage (“right of the lord (seigneur) to mint money”). Illustrated here is a British protest note.
The king passed a law that anyone passing a counterfeit note was to be sentenced to death. Innocent people were being hanged for simply possessing such a note. They were duped themselves and it cost them their lives. This note protested the sentencing of people for possessing such a note rather than those who produced the counterfeits.
I find it hard to believe that government will allow private currency in any fashion. They lose taxes and profit. They will allow it to exist until all the kinks are worked out and it has been fully tested and accepted in the market place. Then the game is over.
Seigniorage has always been the privilege of the lord since 600BC. I remain skeptical about government accepting private currencies based solely upon history. Governments will turn against them most likely after 2015 when they become really desperate for cash.
I have been warning my readers for more than 10 years now that inflation was not coming and that hyperinflation was really nonsense. That entire idea was constructed only on the hyperinflation of Germany with old-school ideas of money. Much of those theories were antiquated in 1971 when we moved to the floating exchange rate system, yet the overwhelming majority failed to comprehend what truly took place.
The idea of debasement of a currency resulted in inflation was the lynch-pin of Gresham’s Law – bad money drives out good. Yet there was another aspect. It was not just that debased money caused people to hoard the old money, it also SHRUNK the money supply. The more you debased, the more you had to issue to fight against DEFLATION caused by the shortage of money.
Gresham was the economic adviser to Queen Elizabeth and he worked for Britain in the then financial center of the West held by the Dutch in Amsterdam. There was the first exchange. This is where people and nations gathered to sell their bonds and to buy insurance. Gresham represented Britain in that marketplace.
However, Henry VIII was a major debaser of the currency. He confiscated the property of the Catholic Church and cleverly played that up for religion, but in fact, he was desperate for money. The more he debased, the more the money supply shrunk. It became like a dog chasing its own tail. Consequently, Henry’s debasement was observed by Gresham for Britain would borrow coins at good silver and then repay with debased coinage. This resulted in the collapse of British credit in Amsterdam.
Nevertheless, such theories were predicated upon the simple fact that money was coinage. It was the difference in metal content that could be compared from one nation to another. The greater the debasement, the greater the hoarding, which simply contracted the money supply. Hence, the value of a currency issue was based upon CONFIDENCE. Since the debasement of Henry VIII brought out the collapse in credit (DEFLATION), what was overlooked here was actually the CONFIDENCE – not the mere metal content.
Bank Money became popular for once you deposited the coinage, it was preferable to pay by bank transfer. The coins did not have to be checked for debasement or clipping. Bank paper money actually rose as a premium.
Today, just follow the CONFIDENCE. That is the common-denominator. It is not whether or not money is gold, conch shells or slave girls as St Patrick reported to his shock upon arriving in Ireland. It is the oldest factor behind everything – do you trust the person you are dealing with.
JP Morgan’s famous reply before Congress is precisely on point. He would never lend money to anyone regardless of the collateral if he did not trust them. Simply stated, ” a man I do not trust could not get money from me on all the bonds in Chrisendom.” To this very day, that remains the cornerstone of the world economy.Some people would never buy a bond of Mexico or Argentina, or wherever based solely upon trust.
It is the collapse in trust in the Euro that is the undoing of Europe. This Brussels does not comprehend what it has done. All the suppression of elections, threats, and shenanigans will not save the day. Europe will collapse under the Euro because there is no trust left in Brussels. The dollar will rise going to a premium as bank money rose compared to coinage. It was simply more trustworthy. Of course, eventually banks began to lend out the money without the knowledge of the depositor who assumed they were paying for storage.
Banksters . . . . sheesh!
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.