6.6.14 - By Craig R. Smith
Today Europe joined America in abandoning austerity by lowering interest rates to below zero. This move forces depositors to withdraw assets from banks and move them into assets with more growth potential; such as stocks, real estate or commodities such as gold.
But what if the ECB and FED experiments don't work? History tells us they are setting the stage for a "Wiemar World" -not just "WeimAmerica", which Lowell Ponte and I covered in our 2011 book, The Inflation Deception.
Europe had been walking down the road of austerity. Pensions were cut and government spending, including social services, was reduced. Strict rules were implemented on Greece, its people and its banks. The wisest choices were made for the long-term.
But the politicians could no longer take the pressure. The unrest of the populace and their demands for more government benefits and growth finally pushed them to acquiesce to unsound politics instead of sound financial decisions.
After WWI, England and France opted for austerity. It was painful in the short-term, but later prevented the hyperinflation experienced in Wiemar, Germany. Wiemar opted instead for massive money printing, leading to a currency collapse.
The new EU strategy now being implemented – suppressing interest rates, flooding markets with cheap money, buying asset-backed securities (ABS) and promoting long-term refinancing operations (LTRO)- will fail like it has in the United States. These actions simply do not create jobs.
The EU believes they are buying enough time to allow the underlying U.S. and European economies to heal. Time won't help. After six years of trying this strategy, the U.S. unemployment and GDP growth numbers should be enough proof.
Europe is returning to the failed Mercantilism/Keynesian approach that has never worked. All it does is kick the can down the road while keeping politicians in power and laissez-faire economics in play.
Soon this bad policy will have to correct itself. When it does, we could face a hyper-inflationary, worldwide depression.
Steve Forbes agrees 100% with these conclusions in his new book and sees a return to the Gold Standard as our only hope ...
In Money: How the Destruction of the Dollar Threatens the Global Economy - and What We Can Do About It, Forbes blames President Obama's money team for the stagnant economy, high prices, declining mobility and big government.
"The Fed's vastly misguided monetary policies are now setting the stage for a new economic and social catastrophe - one that could rival the financial crisis and horrors of the 1930s."
"An opportunity now exists for an aspiring political leader to replace our stagnation-inducing 'easy money' policy with a prosperity-producing 'good money' policy. And the gold standard is the 'gold standard' of good money."
Since the U.S. government has no intention of restoring a national gold standard, Swiss America believes the solution is to put your family on a personal gold standard. It's the best way to protect your assets from the next banking crisis, which is covered in our next book Don't Bank On It! https://www.swissamerica.com/offer/2014Alert.php
Claire Jones, "ECB makes radical shift to boost economy," Financial Times, June 6, 2014. URL: http://www.ft.com/intl/cms/s/0/fd55cd1a-ec98-11e3-a754-00144feabdc0.html#axzz33mTR2sUP
Paul Bedard, "Forbes: Link dollar to gold or face Great Depression II," Washington Examiner, June 3, 2014. URL: http://washingtonexaminer.com/steve-forbes-link-dollar-to-gold-or-face-great-depression-ii/article/2549231
Ralph Benko, "Gold Standard Will Bring Stupendous Growth To America," Forbes, June 2, 2014. URL: http://www.forbes.com/sites/ralphbenko/2014/06/02/enacting-jack-kemps-gold-standard-will-bring-stupendous-growth-to-america-and-the-world/