On the one hand, “mainstream Republicans” are described by CNN's Jack Cafferty as “apoplectic” over the prospect of Ron Paul winning the caucuses in Iowa. On the other hand, the whole party has fallen captive to the 12-term Congressman's “radical ideology,” according to Gary Weiss on the “progressive” web site Salon.com.
“The Republican Party, falling deeper into the clutches of Ron Paul’s "radical ideology," has a new item on its anti-populist agenda: Castrate the Federal Reserve so that it no longer can promote job growth,” Weiss wrote in Thursday's column. Weiss is, well, appalled at “the extent to which Ron Paul's fixation with the Fed has infected the Republican party. Anti-Fed rhetoric, once the province of "ultra-right" (on popularly cited fallacious political spectrums) groups like The John Birch Society, has gone mainstream with the rise of Paul, who has been surging in the polls and now ranks third behind Mitt Romney and Newt Gingrich. He is actually leading in Iowa, and a victory there would really rev up his famously loyal followers.”
Those loyal followers, as well as other Americans, might also be a little negatively revved up about about the report of a Government Accountability Office on the Federal Reserve Bank, issued in July of this year, showing the Fed had secretly lent some $16 trillion to domestic and foreign banks since 2008.
Is it certain that the nations of the European Union are heading for a hard fall? It certainly looks that way. When the overspending of governments such as Greece, Portugal, and Ireland were involved, the threat to the euro was real, but it could be psychologically contained (an important factor in maintaining the stability of financial institutions). Those three nations, after all, are small. Spain, the fourth member of the “PIGS,” was more than half the size of the Italian economy, but much of the industrialized West has viewed Mediterranean nations as inherently volatile.
Two months ago, however, Italy — one of the largest economies in the world — had its sovereign debt downgraded by Standard & Poor’s and then by Moody’s, which reduced the bond rating for Italian government bonds by three notches. The GDP of those five nations — Portugal, Ireland, Italy, Greece, and Spain — equal about $3.7 trillion, or more than 20 percent of the economy of the European Union.
The latest news is that France could have its AAA credit rating downgraded before Christmas. Standard & Poor’s is expected to make that decision imminently.
When Kyle Bass defended his decision on BBC Radio Hard Talk on November 17th to purchase 20 million nickels, he was just putting Gresham’s Law into operation. Bass, the founder and principal of the hedge fund Hayman Advisors, did the math and discovered that he could purchase 6.8 cents worth of copper in each nickel for just 5 cents. Nickels are 75 percent copper while pennies (minted between 1909 and 1982) are 95 percent copper and the recent spike in copper’s price simply made it too good a deal for Bass to pass up.
This is Gresham’s Law in action. The standard definition is that “bad money drives out good.” Simply put, when coins of lesser value are forced to be accepted alongside coins of greater value, the more highly valued coins will be hoarded. In other words, Gresham’s Law reflects the price-fixing disruption always inherent in legal tender laws. A better definition of Gresham’s Law might be “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”
Prior to 1965 dimes and quarters were made of 90 percent silver and 10 percent nickel but with the Coinage Act of 1965 the silver content was removed and replaced with 75 percent copper and 25 percent nickel. Almost immediately the high intrinsic value dimes and quarters began to be hoarded as Gresham’s Law kicked in. Today a pre-1965 silver dime is worth about $2.40 in inflated Federal Reserve Notes.
As reported by Annika Breidthardt for RealClearMarkets.com, the latest European crisis summit that ended last weekend resulted in “a historic agreement to draft a new treaty” which she then characterized as “too little, too late.” Reaction of the equity and currency markets agreed, with substantial losses in American and European stock markets opening the week, and the euro dropping to lows not seen since last February.
The agreement will require EU member states to ante-up $267 billion to the International Monetary Fund which will then turn around and re-lend it to those member states in financial trouble. Exactly how those needing the funds will “ante-up” was left unexplained. The existing bailout fund — the European Financial Stability Fund, or EFSF — will be leveraged, debt upon debt, to give it more ability to lend to those same struggling countries.
But the big news is the moving forward of the date for ratification of the ESM — the European Stability Mechanism — by a full year, to June of 2012. This is the elephant in the living room that few in the media have spent much time reviewing, although a careful analysis is available here. The reason for moving ahead with such a grotesque totalitarian program is obvious: there may not be enough time left to implement it. Investors continue to demand higher and higher risk premiums when lending to Greece and Italy, Standard and Poor’s will be doing another financial review “as soon as possible,” while Moody’s expects to issue its own credit report on European countries and banks early next year. Moody’s took a dim view of the “historic agreement” by noting:
The Federal Reserve has joined an open conspiracy with its other central-banking buddies to steal several trillion dollars from my grandchildren.
The plan is to steal not just from my grandchildren, but from all of us. Each American anywhere who measures the value of his savings, the pay he receives, the stocks he owns and every other possession he has in dollars — the currency that is created and controlled by our central bank — is a target.
Every time the Federal Reserve turns on the printing presses and creates “money” out of thin air (or, more accurately, creates a digital entry on a computer screen), it reduces the value of all the money that is already in circulation.
The equation is simple: The more fiat (unbacked) currency that is created, the less each individual currency unit is worth. The creation of fiat money is the only reason for inflation. Rising prices do not cause inflation, as the powers that be would like you to believe. You see, if you accept that false explanation, you will put the blame for rising prices on businesses — not on government, where it belongs.
Americans are quickly getting poorer as the much-touted economic “recovery” remains elusive. Household wealth plummeted by more than four percent from July to September according to a report released last week by the Federal Reserve, marking the steepest drop since 2008 and the second quarterly decline in a row. That represents an average loss of about $21,000 per household in just three months.
At the end of the third quarter, household wealth plunged by $2.4 trillion, from a total of about $60 trillion down to slightly less than $57.5 trillion. The dramatic drop in net worth — the value of all assets minus total debts and liabilities -—was led by still-declining housing prices and crashing stock values.
Despite wild money printing by the Fed in recent years, home values are not expected to recover any time soon. During the third quarter, American real estate assets lost about $100 billion from the previous quarter. And banks are still sitting on an unknown but huge number of foreclosed properties expected to keep prices depressed for years to come.
Stocks performed terribly last quarter, too, though they have recovered some of those losses so far. The S&P500 Index lost around 14 percent from July to September. And according to the Dow Jones U.S. Total Stock Market Index, equities shed $2.6 trillion for the quarter.
In his interview at King World News, James Turk, founder of GoldMoney and author of The Collapse of the Dollar, noted in his travels around Europe that “there is one common trait, regardless of which country I am in: people are really frightened about the possibility of the collapse of the euro. Money continues to move out of the European banking system, which explains why central banks stepped in with some money printing last week.”
Investors are bullish on Europe yet again after a two-day summit in Brussels produced a triumphant agreement on the part of the 17 eurozone member nations to get their collective fiscal house in order. The options for Europe going into the conference were stark — at least, according to the doomsday rhetoric emanating from European leaders and media commentators on both side of the Atlantic. Failure to reach the foreordained agreement at Brussels would have been “a luxury we cannot afford” opined French President Nicholas Sarkozy, who added that “maintenance of the eurozone is our duty. We have no other choice.”
Well, actually, the other choice, according to the powers that be, was continental and global financial ruin. “Merkel and Sarkozy have been clear — back the plan or face catastrophe. It is a simple as that,” wrote CNN anchor Richard Quest. “The unfortunate point, often overlooked, is that the eurozone countries really have little choice. The euro doesn't work as currently constituted (it never has). They either change it or the project will collapse.” And a collapse of the eurozone would probably reverberate worldwide, possibly leading to a financial panic that would dwarf the 2008 debacle.
Cowed into submission, the eurozone countries feverishly agreed to subject their fiscal policies to international supervision, with the EU empowered to impose fines and sanctions for failure to keep budget deficits essentially at zero and other transgressions.
In his candid appraisal of the letter from Germany’s Angela Merkel and France’s Nicolas Sarkozy to the European Union meeting that starts Friday in Brussels, Dan Murphy makes clear that this summit will be different from the previous 20: This one is determined to override national sovereignty to save the euro. The core of the letter is the offer of the fatal alternative to the euro zone nations: Either give up essential sovereign control over your budgets to the EU, or destroy the euro.
