Wednesday, April 17, 2013

A lone voice of reason?

Dear Mark-just say no

For all the talk of bubbles past and present, the most damaging bubble of all has been in the market for central bankers. The first real superstar was Alan Greenspan, and his bubble burst spectacularly. Yet here we go again, expecting Bernanke and Draghi and Kuroda to save the world economy by wrecking its money.

Posted by pedro2706 @ 08:58 AM (1808 views)
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3 thoughts on “A lone voice of reason?

  • Looking at the USD to GBP chart, Sterling is about to take a battering vs the world reserve currency:
    http://uk.finance.yahoo.com/q/bc?s=GBPusd=X&t=5y&l=on&z=l&q=l&c=

    Interestingly, GBP is rising against Euro, long term trend, and Euro is collapsing against the US Dollar. Yes, USA is inflating, but there is more political fear in Europe, like, raiding private accounts. Capital flees such things more than they flee lack of return, which explains why folk are willing to park capital in US Treasuries yielding negative.

    Looks like Carney will smash Sterling, possibly destroying our reserve currency status. If he manages that, if Sterling as a percentage of global reserves collapses, we are then vulnerable to hyperinflation, since new money printing will no longer be absorbed by global markets. It seems that the banksters are trying to destroy Sterling enough to keep up with flight from the Euro, because they want us to join eventually, but it will be just like the Exchange Rate Mechanism, because people do not understand, that capital will still flee to Britain, because the United Kingdom is, well, united. However, Alex Salmond could destroy that with separation, which would lead to mass capital flight if the UK breaks up.

    Essentially, Sterling is as safe as the political union, in these times, and the Dollar is as safe as the Union between the States. The Euro is collapsing because of no unity and, because of no rule of law after insured depositors were given a haircut whilst oligarchs were given heads up and allowed to flee.

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  • One thing to remember, fiat currency is not completely backed by nothing. It is backed by a complex web of, the economic activities of the nation, the monetary policy of the central bank and its corporate banking subsidiaries, the extent to which an economy is debt financed, alongside the rule of law and political stability. Money printing is just one aspect of this.

    America is the most stable of all economic zones, so will come out very well. Ironically however, that success could be mitigated by a strengthening dollar, which the Fed will fight with yet more inflation to keep interest payments down. Eventually there will be a default in the debt rather than a collapse in the dollar, I believe. However, US Economic and military power insure that they can get away with default, and the dollar index would collapse, but only back to a normal level, in my opinion, because it would be combined with worse scenarios in Europe, where default would result, most likely in a breakup of the Union, combined with capital controls, and that, the fear of that, is what is driving up the dollar.

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  • The only scenario where this fails is if the crisis is so bad that States break away from the Union in America. Whilst nullification of unconstitutional laws is likely, actually, inevitable, the flexibility of the 10th Amendment there, which will be exercised, is actually an escape valve which guarantees political stability, unlike Europe, where there are no States Rights flexibilities, where stubbornness must eventually lead to divorce.

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