Return of Weimar Monetary Policies? 13 comments
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If it were possible to pinpoint the beginning of hyper-inflation in the Western world, this Monday September 13 stands a good chance of becoming a historical milestone in hindsight.
Investors woke up to a joint announcement of the major central banks that said that the Fed, the ECB, the BoE and the SNB would provide unlimited U.S. dollar refinancing.
The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment. Funds will be provided at a fixed interest rate, set in advance of each operation. Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.
Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The Bank of Japan is considering the introduction of similar measures.
By now the statement,
Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets
raises more fears instead of the calm it is meant to establish in financial markets.
Weimar Comes Alive Again
The new wave of unlimited cash may prevent a seize up of credit markets, but this will only temporarily alleviate the symptoms but not the root of this crisis which was too easy money in the first place.
Weimar is alive again. In 1923 the German government trumpeted similar news. Lacking computers then, Germany announced that it had installed a total of 23 money printing presses all over the country which would print money 24/7.
What was then a German phenomenon - that ultimately led to the rise of Adolf Hitler - will now happen on a global scale. There are more parallels. The Nazis organized a huge rearmament and public works program to bring down unemployment rates exceeding 30%. The USA resembles this move with its limitless spending on its military apparatus that has grown exponentially in this millennium.
In the battle to maintain unbacked Federal Reserve Notes (FRNs) as the world reserve currency, the Fed pushes more of its freshly digitized money into the market with the welcome side effect of gaining forex reserves that can be used at a later stage to prop up the dollar once fundamentals set in again. And the fundamentals tell us that the USA is the most indebted country in the world sliding into a severe recession, if not depression. Any dollar strength mirrors only the structural problems in the Eurozone, where easy money has led to the same problems as in the US banking sector.
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This article has 13 comments:
I should think McCain could do a good resemblance as a warmonger and Obama as bleeding heart both printing money to serve their ends. Either way we will get inflation and this is the route the US have used to solve their debt problems ever since they forced the world off the gold standard in the 1973/4 crash,which suited other Governments also.
The big question is what do you invest in to counter raging inflation?
Cigarette makers and cheap food stocks used to be the answer. What now?anyone got an answers?
At the risk of being highly unoriginal, the answer has to be ... GOLD
Actually, it should be, "this Monday, October 13".
Hitler had nothing to do with the hyperinflation and, if fact, Hitler and the Nazis, under a form of state controlled capitalism, (usually called fascism) built a massive economic-military machine out of the economic rubble of the Weimar Republic, in little more than 6 years (1933-39) that almost defeated the military and economic forces of the entire world.
The Germans had never experienced democracy before the Weimar Republic and democracy was pushed on them by Woodrow Wilson (the same way the George Bush administration has pushed democracy on Iraq.)
Before the Weimar Republic, Germany had hundreds of years of experience with big dictators (Prussia and Bavaria) and small dictators (princes) in over 300 small states.
Bismark, under the former Prussian prince Wilhelm I, unified Germany by placing it under the control of the miltaristic Prussia and paved the way for Hitler after the economic collapse produced by the defeat of World War I.
I don't think it is helpful to compare Germany and and the United States.
Not that we couldn't have hyperinflation or a dictatorship here but it wouldn't be similar to Germany's.
It would probably resemble a George Lucas movie on the outside with the morality of a Wall Street financial institution (take your pick) on the inside and be run by a nice man like Warren Buffet or Bill Gates :)
Read his own words.
On war.....no thanks.
On Hitler... no thanks,
On Obama....no thanks.
McCain....not much better
Facism is not state controlled capitalism....it is quasi business/government controlled socialism. The Nazi party was a socialist party by name.
Capitolism = Privately owned and controlled means of production
Socialism = Government owned and controlled means of production
Fascism = Government controlled means of production that are privately owned.
Communism = Everything controlled and owned by a one party government
America = a blend of the first three.
Our defense industry, much of our financial industry, etc are fascist.
Our education system is socialist....probably one reason most in the country don't know the differences pointed out above.
Homebuilders are obviously capitolist as are your local mechanic, the plumber, the engineer, the architect, and most small business.
So in this country we have a blend. Note that most of all of our economic problems are the result of government over spending in areas where our industries are highly fascist or socialized. Funny the supermarkets (capitolist) almost aways have what we need. They have market forces constantly providing them incentive. Remove proper free market incentives and you have clueless individuals misdirecting the resources of our nation....ie fannie mae and the federal reserve (fascist) and a really poor education system (socialist), Grand looking airports and football stadiums but bankrupt airlines etc...