Wednesday, November 30, 2011

Activist Post: A Three-Step Plan to Save the Euro with Gold

Activist Post: A Three-Step Plan to Save the Euro with Gold:
History shows us that all fiat money (just paper, or base-metal coins; no precious metal ‘backing’) always fails by losing its purchasing power, usually due to excess creation of new money; this is called ‘monetary inflation’ (which leads to ‘price inflation’ because the currency becomes worth less).

We saw it recently in the hyperinflation in Zimbabwe. Germany did it in 1919, and France in 1716 and 1793, and there are many others. Now the Euro currency is failing due to excess spending and borrowing of many European Union (EU) members, but especially Portugal, Italy, Iceland, Greece, and Spain (the PIIGS!). Governments and bankers love fiat money and central banks because they can spend and bail themselves out with new money or loans, rather than use unpopular taxes or suffer defaults.

Since the USA cut all ties to gold in 1971, all nations have ‘gone fiat’ (‘floating’ exchange rates) and borrowed and spent to excess.

The endless supply of money funds the welfare-warfare state (wars are expensive) and creates a ‘moral hazard’ (perverse incentive) for greedy bankers and Wall Street firms to take excessive risks (including 40 to 1 leverage, rather that 5 or 10 to 1) because they know they will be ‘bailed out’.

This casino mentality also fosters corrupt deals with falsely-labeled debt offerings (AAA ratings for junk) and bizarre, risky derivatives and Credit Default Swaps...