Long-time readers are no doubt familiar with my call for catastrophe in Britain, Japan and the US. Possibly, China should be added to that list, but lets stick with the original three for now.
Japan is showing a trade deficit for the first time since 1980. Feel free to short the yen at this point, as it is going to become a one-way bet.
Britain has the biggest debt load of, well, anyone. And is relying on its financial sector. And has a government larger than 50% of GDP. And is inflating the living crap out of its currency. And haven’t even begun with real austerity measures.
The US is looking better. But IT IS NOT. You see, while you were sleeping, Crazy Bennie cranked out a few more zillion dollars, and the US government spent a roughly equal amount on crap. The coming “boom” will not be any boom for the dying middle-class, it will only be price inflation. Sure, GDP will probably rocket. And, with a lag, prices will finally do what anyone who knows history has said they will do. Rise. Relentlessly.
And thanks to the ridiculous foreign policy of the US, there is a war starting on the dollar. A war that will be won by all other currencies, but most significantly gold.
Speaking of the UK, I watched this video today:
it comes from a homepage called positivemoney.org.uk
just wondered if you knew about them, if they’re well known, and if you have any comments on their views? they seem to have part of the problems figured out, it’s just that their conclusions and solutions are really weird. like for example, at 11:43 he calls the current system “the capitalist system”, and on this video they suggest that ALL money should be created by the state:
Lemme get back to you on that tomorrow, as it might take a little while to go through it all.
Viktor : Basically, they seem to have described the process of fractional-reserve banking pretty well. The fact that banks can pretend that you have “money in the bank” while lending it out to someone else is the equivalent of “creating money out of thin air”. The re-occuring banking crisis that plague our societies stem from the fact that the only “real” money in the system is that which has been issued by the central bank, which is always just a fraction of the outstanding claims on commercial banks. If banks kept the money “in the bank”, there would never be a bank run that couldn’t be resolved by just simply handing the money back to the depositors.
The idea that “the State” should create all money is nothing new. One could argue that it would be more “honest”, meaning that we would have a democratically controlled money supply. Likewise, if fractional-reserve banking was under such a scheme forbidden, there would be no bank runs. There is only one problem with this scheme – never in history has a State ever had the control of money-production and not abused it until hyperinflation ensued. The incentives will always be to print more. A government-controlled money system is just a countdown to hyperinflation. Now, that can obviously be said about our current monetary system as well, but we may be surprised to find that the one large obstacle to hyperinflation may be when commercial banks realize that if the dollar (or any other currency) is hyperinflated, they more or less lose everything. Hyperinflation wipes out all lenders of money, and leaves only the holders of real assets standing.
The solution has always, and will always be commodity-money (gold or silver, usually). The reason for this is as simple as it is beautiful : Scarcity. You cannot print it. If a government were to issue commodity-money then this would indeed solve the problem, unfortunately, it is again only a matter of time until they start issuing paper receipts for commodity-money that far outnumber their actual reserves. Thus, in my view, the only way to have a working monetary system is to have private issuers of gold and silver money, and private banks that offer to store this money (for a fee), and are not allowed to lend it out unless explicitly agreed to with the depositor, who can then not access the money until the loan is repaid.
In essence, free gold and silver money and prosecution of fractional-reserve fraud is the only way out of our current predicament. I believe it will happen – eventually, but first the current monetary system must be more or less destroyed by banks and governments. After that, they’ll probably try the SDR. After that, they will try unredeemable commodity-money. And somewhere after that, they will either institute the system I have described, or private citizens and business will have created it themselves – legal or not – simply to be able to have commerce functioning properly without the problem of constantly rotting money.
great answer, thank you!