croc
15th December 2010, 07:42 PM
The quantity of paper money will continue to grow as the world wrestles with its problems. As every day passes, one’s worst fears of yesterday materialise. Governments, driven by social pressures rather than dispassionate economics, are forced into ever-increasing financial rescues; but by far the biggest problem facing them is the seeming inevitability of a full-scale banking collapse.
That is what has the panjandrums of Euroland in a panic over Ireland. We are told by the Bank for International Settlements that total Irish debt to foreign investors stands at $791bn, the substantial majority of which is owed by the banking sector. Ireland on its own might not derail European banks, but the domino effect of the spreading problem most probably will.
This obviously cannot be allowed to happen. Forget the rights and wrongs of “too big to fail”: politicians and therefore central banks have no option but to intervene. But what can they do? They cannot fund a rescue with taxes, and they are already borrowing as much as the bond markets can stand. There is only the nuclear option left, however it is dressed up: shore up the system by printing as much money as it takes. Printing money is simply the way governments buy time.
This analysis may turn out to be unfortunately right, or hopefully wrong; but it is more right today than it was last month and also progressively so for the months before that. The rising interest in precious metals is entirely consistent with the growing likelihood that the printing of fiat currencies will continue to accelerate in order to buy off default. While the translation of monetary inflation into price inflation is rarely an even result, we know from both economics and the experience of history that the two are linked as cause and effect respectively. So we can conclude that paper money will continue to lose its value for the foreseeable future.
more at
http://www.financeandeconomics.org/Articles%20archive/2010.11.22%20gold%20and%20cash.htm
That is what has the panjandrums of Euroland in a panic over Ireland. We are told by the Bank for International Settlements that total Irish debt to foreign investors stands at $791bn, the substantial majority of which is owed by the banking sector. Ireland on its own might not derail European banks, but the domino effect of the spreading problem most probably will.
This obviously cannot be allowed to happen. Forget the rights and wrongs of “too big to fail”: politicians and therefore central banks have no option but to intervene. But what can they do? They cannot fund a rescue with taxes, and they are already borrowing as much as the bond markets can stand. There is only the nuclear option left, however it is dressed up: shore up the system by printing as much money as it takes. Printing money is simply the way governments buy time.
This analysis may turn out to be unfortunately right, or hopefully wrong; but it is more right today than it was last month and also progressively so for the months before that. The rising interest in precious metals is entirely consistent with the growing likelihood that the printing of fiat currencies will continue to accelerate in order to buy off default. While the translation of monetary inflation into price inflation is rarely an even result, we know from both economics and the experience of history that the two are linked as cause and effect respectively. So we can conclude that paper money will continue to lose its value for the foreseeable future.
more at
http://www.financeandeconomics.org/Articles%20archive/2010.11.22%20gold%20and%20cash.htm