What point are we at in the “GFC”?

I read William Rees-Mogg’s article in the Daily Mail entitled “We are stuck on a wheel of misfortune” dated 4th September 2011 over the weekend. Like many newspapers, magazines, tip sheets and research in my office and household they tend to mount up at an alarming rate this time of year and I half watch TV programs like the ‘Antiques Roadshow’ whilst siphoning off the majority of unnecessary print copy for eventual utilisation by my sturdy Clearview woodburner. This article was one of the few that have been retained.

I like Rees-Mogg’s articles and read his biblical hardback “The Daily Reckoning” when it was first published a few years ago. In it he said…….

“Business life tends to have a rhythm. One of the reasons older investors tend to have an intuitive advantage over their younger colleagues is that their experience of past cycles in markets offsets the greater technological understanding of younger investors.”   Rees-Mogg and his co-author, Jim Davidson go on to say…..

“It is also important that people should understand that in business ‘the trees do not grow to the sky’ -meaning things cannot continue past their natural boundaries – a favourite maxim of Winston Churchill, which he applied to war rather than to business”.

The “GFC” incidentally is now being described by many pundits as a WAR. In fact I’ve even heard it referred to as WW3.

The Daily Reckoning author, Bill Bonner (another colleague of Rees-Mogg’s) today in his Daily Reckoning blog suggests that there’s a major conspiracy afoot. In essence (my view) what we are experiencing is an economic war between those who believe in proper ‘freedom of markets’ and those who believe that politicians and architects of the “GFC” can resolve and solve the complexity of the problems. Bill Bonner says….

  • Europe faces its “toughest hour since WWII”, says Angela Merkel. What does she propose? More centralisation. Centralisation got Europe into this mess – harmonising interest rates so that the Greeks and Italians could borrow more. And now, more centralisation, she believes, will get it out.
  • Europe is taking no chances. This debt problem is a slugger. What to do about it?
  • Who knows more about debt problems than anyone else? The people who cause them, of course. So, under great pressure from the centralised European authorities Greece got rid of its Papandreou, after the man had the gall to suggest letting democracy work. He wanted the people to vote on further austerity measures. It replaced him with Papademos… a guy who won’t make the mistake of deferring to the masses. After all, he was vice-president of the European Central Bank for years. And he taught at the Kennedy School of Government at Harvard.
  • Meanwhile, Italy too has been forced to get rid of its popular, but difficult to control, elected leader – Silvio Berlusconi. It has put in a company man. Yes, a company man. What company? Goldman Sachs, of course. The new fellow, Mario Monti is an ex-Goldman guy. And so is the new fellow at the European Central Bank, Mario Draghi. Monti was also an EU commissioner. Draghi ran the Bank of Italy as the nation built up one of the world’s biggest piles of debt. Then, when Italy’s cost of borrowing shot over 7%, in came Monti and Draghi.
  • It is almost as if they planned it that way. Who’s the biggest seller of debt on the planet? We don’t know… but Goldman Sachs has to be up in the rankings somewhere. You’ll recall it was Goldman that helped Greece structure its debt so that it could abide by the letter of its treaty engagements with Europe but totally thumb its nose at the spirit of it.
  • And now the debt has blown up… and the Goldman boys are on the job, managing the mess they were so instrumental in creating.
Interesting times indeed. Rees-Mogg suggests that the ‘depression’ that we are witnessing will last 10-13 years (presumably from 2007). That gives us plenty of time to remind our politicians that the regulators are totally wrong to snuff out experience over examination. Reading a speech made by Alf Field at the recent Gold Symposium in Sydney 14/15th Nov “The Moses Principle” the gold analyst says referring to the younger generation..
“Most have had no exposure to monetary history or what money really is. The new “Moses” generation will have to re-learn the lessons of monetary history before the world can enter a new era of sound money and stable economic growth.”
Alf Field then goes on to say…
The modern generation will have to face some brutal truths as the world deals with the ongoing global financial crisis.” The following are the brutal truths that apply to the USA and the world:

  1. The slate needs to be wiped clean and a new sound monetary system introduced.
  2. That will require the elimination of all debt, deficits, unfunded social entitlements, the US Dollar as Reserve currency, and the big one, the $600 trillion of derivatives.
  3. To eliminate these problems by default and deflation will cause a banking collapse and untold economic pain, leading to riots and political change.
  4. Politicians are appointed for relatively short terms and opt for the easy solutions. 
  5. While politicians continue to have the ability to create new money at will, they will do so in order to prevent a melt down on their watch.
  6. Consequently the odds point to governments wiping the slate clean by generating enough new money to eventually destroy their currencies.
  7. The new international monetary system is likely to involve precious metals. It will have to be money that people trust and that governments cannot create at will.
This has happened many times before, dating back nearly 900 years to the first paper money introduced in China. History is full of attempts to use paper or fiat money, all of which ended in the destruction of that money. The last century saw virtually every South American country “wipe the slate clean” and begin again with a new money. Some did it several times. The Romans faced a similar financial crisis and resorted to reducing the silver content of the Denarius, eventually by about 95%, before people refused to accept the Roman coins.”
If anyone has read some of my earlier blogs there appears to be a pattern emerging here. 
More on Gold & the “GFC” later!
PS  “GFC”   = Global Financial Crisis in case anyone was wondering

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