America, the UK and China, not members of the Eurozone, and other
countries will be asked at the G20 this week-end to generously chip
into a new mammoth fund to save Greece, Portugal, Spain, Italy and,
if the truth is to be told, France also. The reason is that Germany,
Finland, Slovakia and Netherlands, which manage to control their
budgets like any good housekeeper, will not be able to save the
Eurozone by themselves.
China, which has already invested a quarter of its reserves in the
Eurozone, says it won't subsidize it any further until it shows
evidence of serious budget control. The UK, whose government debt is
already quite as bad as Portugal's proportionately, is only sustained
at present by its past reputation and the grace and favour of its AAA
credit rating given (reluctantly) by Fitch, Moody and S&P. Even now
its debt is getting worse and it can only help the Eurozone by going
further into debt at a faster rate. America, already downgraded one
notch by S&P (and due for other downgrades quite soon) is, if
anything, in an even worse state than Portugal proportionately. But,
maybe, America will help. It's already the world's most prolific
printer of money and Bernard Bernanke is a stuck-needle Keynesian.
At least, Bernanke says he is. He's also a highly intelligent
economist. Despite telling a Congressional Committee some three
months ago that he knows little about the history of gold currency,
he will be thoroughly acquainted with the agonies of President Nixon
and his advisors in 1971 when deciding to go off the gold standard
because Fort Knox was losing too much bullion to European exporting
countries. Like scores of central bankers all round the world,
particularly China, he is probably now quietly buying gold -- of that
I am becoming increasingly convinced.
If the Eurozone doesn't repair itself one way or another in the next
few weeks it threatens to collapse and initiate a new world-wide
depression far worse than the '30s. America will revert to a gold
standard at the midnight hour. China, Russia, Brazil and other
countries have been calling for this for years. Robert Zoellick,
President of the World Bank, suggested this last November. One of
Bernanke's present central bank Governors and a past economic advisor
to President Bush, Larry Lindsey, is calling for it. Two of the
Republican contenders for presidential candidacy are calling for it.
Several US State governments are already drafting legislation for
this. Eminent voices are now rising even as the price of gold
continues to rise.
America is still such a lynch pin of the world economy that once
America decides to go back onto the gold standard, the rest will have
to follow (in the same way that all their currencies inflate when the
dollar inflates). It could be done quite as simply and rapidly (that
is, overnight) as when President Nixon took the US dollar off the
gold standard. Announced with a fancy flow of words by Obama and
Bernanke the American public will accept a gold-standard dollar in
just the same way as they accepted Nixon's decision to go off it --
that is, in a totally non-plussed state of mind. Although the idea
(and practice) of a gold standard currency is simple enough, it has
certainly foxed the minds of politicians so far, hitherto preferring
to take the easy way out of difficulties by printing money.
If the Eurozone gets out of its impasse in the coming weeks by
causing China, America and the UK to print even more money (and thus
invite the danger of hyperinflation), then going back onto the
pre-1914 gold standard might have to be left to the next President in
2013 and maybe his appointment of a new US central banker when the
next extreme crisis occurs. Whatever, and whenever, the present
mayhem cannot go on for much longer.
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/10/
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