The grand plan of the 12 year-old Eurozone is in great danger of
unravelling this week. This at least is the headline verdict this
morning of the two leading financial newspapers of the world, the
Financial Times and the Wall Street Journal. The more often that
politicians say something like "a solution is emerging", the more
they are being disbelieved because it is known that the three leading
politicians, Angela Merkel of Germany, Nicolas Sarkozy of France and
Silvio Berlusconi of Italy are now at one another throats when
talking in private. And, if the Eurozone unravels, then, as all the
pundits keep on telling us, it will wreak havoc on the economy of the
rest of the world with national currencies in a state of chaos.
On this Monday morning, America and China are looking on with great
apprehension, unable to intercede, powerful thought they are in other
ways. The International Monetary Fund (IMF), according to several
accounts, has given up on finding a solution. The European Central
Bank (ECB), weakened by the recent resignation of two key personnel,
and as yet without an operational chairman, has already reached the
limits of its constitutional power. America's central bank, the
Federal Reserve (USFed), is totally non-plussed about its own
monetary policies, never mind those of Europe or the rest of the world.
At the same time, a core of maybe 100 individual very rich investors,
locked in self-imposed silence at the moment, but keenly observing
one another and waiting for the butterfly wings of one of them to
flutter, are poised to shift billions of dollars and euros in order
to protect their money. If and when they feel they have to, the fate
of the Eurozone will be decided. Within hours, thousands of other
professional investors and institutions will follow in a panic for
safety's sake and, within a day or two, tens of thousands of amateur
individual investors will also try to follow -- if indeed, the stock
exchanges of the world are not already closed down for a week or two by then.
If fears are realized and the beginning of a world-wide depression
follows as of this week -- with likely social chaos in many countries
-- logic tells me that only two entities can attempt to save the
situation in the short term. The reason for saying this is that they
both already have far more operational power than politicians and
banks. And they will, of course, both want to survive. I speak of
national civil services on the one hand and transnational
corporations on the other. If they act, then politicians and banks
will have to do as they're told, if they want to retain any future role at all.
More specifically, the treasury departments of perhaps a dozen of the
more advanced countries will dust-off their plans for food tokens for
use in emergencies (such as in the aftermath of a nuclear war), in
order to try and ensure that the majority of their populations have
at least sufficient food for the next few weeks or months. In effect,
this will immediately become a new currency, probably based around a
staple feature, such as a specific weight of rice or wheat, as its
standard. It will have a real value way beyond any other existing
money that can be printed because it's very likely that the latter
will be seesawing about uncontrollably (if indeed the euro has any
value at all beyond this week).
At the same time, the largest transnational corporations, perhaps a
dozen of them with some of the most street-wise directors in the
world on their boards and experts in their closest support
departments, will consult together without any shadow of a doubt
because they'll already be economically intertwined and can only
survive together. Above all else they'll want to maintain some sort
of respectable momentum even if investment pkans are put on ice for
the moment. When they see the politicians, banks and printed
currencies falling apart all around them, they, too, will want to
institute a basic currency of account to use between them. This,
too, will have to be based on an essential standard. Once
established by a dozen or so of the largest corporations, then it
will become force majeure for the rest -- if they want to remain in
economic existence. As an electronic digit, conveyed by the Internet
and recorded on computerized accounts systems, it could ripple down
through all businesses within days and weeks, even down to the
smallest village shops in the advanced countries.
If this occurs, the corporate currency going downwards and outwards
will meet the civil service food currencies going upwards and inwards
probably at the level of the largest food supermarkets in the world,
such as WalMart or Carrefours or Tesco. At that stage a currency
exchange value between the two will have to be arrived at as quickly
as possible. It will be simpler for the individual civil service
currencies in different countries to adjust so as to be 1:1 with the
world-wide corporate currency. Or it could be (more likely to be!)
something like 1,000:1, whatever the weight of the standard chosen in
both cases. Whatever the ratio, so long as they are fixed in relation
to each other, it doesn't matter. They would then, in fact, become
one currency.
What will be new world trading currency be based on? In theory it
could be any one of a number of commodities which are (a) valuable
and (b) relatively stable in supply from one year to the next.
However, it is almost certainly going to be gold because something
approaching two billion individuals in the world already regard it as
valuable and possess it in various forms. Also, all the major central
banks of the world have gold in their vaults and they still define it
as a foreign exchange currency. The IMF has gold. Ironically perhaps,
even the ECB started with a stock of gold when it launched the euro
12 years ago! The USFed has gold, even though it has never been
audited since 1953 and its present quantity is regarded as one of
America's highest secrets. (Interestingly, Japan's central bank has
no gold, because it's not allowed by America to have any. Israel's
central bank doesn't have gold either. Its governor, perhaps the most
experienced central banker in the world, Stanley Fischer, doesn't
stock gold because he is so confident of Israel's export earnings of
high-value products that he can import gold at any time he wishes to.)
How will the transnational corporations fix on the value of a basic
gold currency? They will be able to compute the total amount of
money that is presently in use by the world economy (I think it's
equivalent to around US$150 trillion) and they'll divide it by the
amount of marketable gold in the world (that is, outside museums --
about 180,000 tonnes). Thus the currency will have a rough and ready
market value to start with and, for several months, it will probably
seesaw around somewhat until it settles down. The seesawing in this
case won't matter because its value will rise and fall together for
all entities using it. When it does settle down, nostalgia being as
powerful as it is, national civil services (and politicians
endeavouring to retain their role) will want to revive their own
banknote currencies. In order to show that they are now reformed
characters they will probably fix them at 1:1 with the world
currency. After then, the value of individual national currencies
will depend on their countries' export potential -- that is, of how
much use their best products are to the rest of the world when
exchanged by trade. When national currencies, too, settle down in due
course, their currencies will continue to change according to their
economies but only very slowly from year to year according to the
changing wisdom of their governments as to their attitudes and
taxation of business.
Well, the above is a stab of what could happen. Meanwhile, one of
our English newspapers today (the Daily Telegraph) has the following
headline in its business supplement: "Banks at odds with Europe on
Greece". Dear me! Bankers and politicians falling out! Having been
co-conspirators for the past 100 years in foisting inflated money on
the rest of us, it's now pistols at dawn. If this continues neither
will win. Investors will decide and the two entities described above
will do the mopping up.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/10/
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