by Alex_Wallenwein
Aug 02, 2008
from
MarketOracle Website
|
Alex holds a B.A. degree in
Economics and a juris doctorate in Law. His forte is research. In
late 1996, he began to research how money is used by some to exert
political and economic control over others' lives. In the process,
he discovered that gold (along with silver) is the common man's
antidote to this effort. In writing and publishing the Euro vs.
Dollar Monitor, he explains the dynamics of this process and how
individuals can harness the power of gold in their efforts to regain
their political and financial autonomy.
Just like driving your car, investing only makes sense if you can
see where you are going. The Euro vs Dollar Monitor is the golden
windshield wiper that removes the media's greasy film of financial
misinformation from your investment outlook. Don't drive your
investment vehicle without it! |
Like its metallic counterpart, the Euro currency
has the tendency to make other currencies it comes into contact with more
like itself – radioactive. The inevitable result is the death of
(natural) national currency systems.
The Nature of the
Euro-Beast
The euro’s architects have recognized that the worldwide dollar-reserve
system cannot be sustained. The reason:
The
US Fed’s dual – and conflicting - mandate of price-stability and
full employment. The Fed was sold to Congress via the ‘hook’ that it would
allow Congress to both control inflation and maximize employment if only
Congress would agree to set up this version of a central bank in the US.
As we all know, there are very few politicians who can and will resist such
a temptation.
Since that proposition has predictably turned into a slow-moving disaster,
the euro architects figured out that they will have to give up some of the
power bestowed upon them by centralized control of interest. They did this
by limiting the ECB’s function to maintaining “price stability”, i.e.,
limiting credit-inflation.
In so doing, they curtailed the ECB’s ability to goose the markets on demand
in order paper-over occasional and inevitable economic downturns.
At the same time, they took the controls off the
price of gold by,
-
trying to maintain roughly fifteen
percent of the system’s forex reserves in the form of gold
-
by revaluing its gold reserves quarterly
at market prices
This is in no way a form of gold backing in the
traditional sense. There is no exchangeability of Euros to gold at a
legislatively fixed rate, but it shows that the euro is set up to be
supported by a rising price of gold, rather than being undermined by it.
There has been and continues to be much talk about the euro being designed
to ultimately take over the dollar’s reserve-currency function. That is not
the case, at least not completely.
If you were to ask whether the euro was in fact designed with that goal in
mind, the answer would have to be a definite yes and no. “Yes” in the sense
that the euro was intended to incrementally displace the dollar, and “no” in
the sense that the euro would not try to assume the full burden of the
dollar’s world reserve currency function.
Because of the factors mentioned earlier, the euro can’t (or rather won’t)
be inflated fast enough to spread around the world and fuel global
malinvestment (er, … economic growth) the way the dollar did.
Instead, the hidden idea behind the euro was to literally force the creation
of other regional currencies throughout the world.
By inevitably competing with the dollar for its reserve function, the euro
creators did sign the ultimate death warrant for the US dollar system. Yet,
by having this “anti-inflation” bias (which is not really adverse to
inflating the money supply at all, but merely tends to slow the process
somewhat) any attempt to merely substitute the euro for the dollar worldwide
becomes simply self-defeating...
The only solution, then, is to force the creation of other currency
unions so that the euro doesn’t have to completely take over the
dollar’s old function.
At least, that’s what the plan was.
Irradiating the
Dollar?
Now, just to eliminate any misconceptions, what will “force” the creation of
these other currency unions is not some kind of magical force emanating from
the euro. Rather, what is forcing this new system to emerge is the
deliberate deconstruction of the dollar by those elected and appointed to
preserve it, so the euro-uranium comparison “limps” to that extent.
The euro is not a European “attack” on the dollar. Remember who is credited
with the title “grandfather of the euro” – Robert Mundell, a US
professor of Economics at Columbia University. Okay, so he’s originally a
Canadian. So what? The design for this new system still emanated from the
US, just like the US was the birthing-den that spawned both the League of
Nations and
the United Nations.
Still, the combined effect of the creation of the euro and the time-warp
destruction of the dollar is the same as if the euro was actually
radioactive. Only by creating other currency unions can the world financial
system be weaned from the dollar without turning the euro into just another
dollar clone. In other words, the idea behind the euro has a very strong
tendency to clone and proliferate itself across the globe. This is not just
theory. It is happening as you read this.
There are, of course, arguments floating around maintaining that this or
that regional currency (East Asia, for example) would not be feasible
because the different countries’ economies and standards of living are too
diverse, and because trade integration is already so high that a single
currency would not be beneficial.
However, the fact remains that, once the dollar’s global reserve function
is successfully eliminated via an engineered crash of the US economy,
there will be no choice but to initiate at least regional anchor currencies
that can assume the dollar’s reserve role in a more limited, regional
fashion.
These anchor-currency or regional reserve
currency arrangements will then inevitably lead to regional single
currencies.
The Good News for Gold
Investors – Sort of
The good news for gold investors is that this development will tend to take
all official opposition to rising gold prices out of the global monetary
equation.
The death of the dollar will the
renaissance of gold – but not as an official currency per se; only in it
store of wealth function. As such, gold will be allowed to find its ultimate
equilibrium price relative to all other currencies without constituting an
actual threat to its fractional fiat cousins.
The problem is that currency unions are also what could be labeled
“sovereignty pools.” Countries participating in them will abdicate their
national sovereignty to an ever-increasing degree.
The nest example for that is Europe, where the
central governing structure becomes more and more powerful in the political
sphere since political decisions become farther and farther removed from the
individual.
The Freedom of Choice
Nation states, as imperfect as they might be, are natural repositories of
individual liberty by the mere fact that, as long as you have different
countries with differing political regimes, you have a choice regarding
where you want to live. If your country gets too oppressive, you can flee to
another, less oppressive one.
In the end, the logical conclusion of the currency-union movement would be a
world without sovereign nation states, dominated by regional arrangements
that do not have the natural cohesiveness of “one language, one culture, one
country.” These regional structures can then be easily subsumed into a
global body dominated by the most powerful economic and military force.
By the time this all comes to fruition, that
force will be what today is known as China.
In the past and since World War II, the US was this power, but it was only
able to sustain it because of its status as the world’s reserve currency
issuer and its technological superiority. These two bases for its dominant
power are now being dismantled as a result of the introduction of
Euranium – the new, designer-made, radioactive element in the periodic
table of world currencies.
While ‘euranium’ undermines the dollar’s reserve currency status and thereby
its demand foundation, the US financial elites’ own
efforts at globalization are destroying
America’s natural technological superiority. US corporations (as well as the
US government) are giving the Chinese all of our secrets - in return for the
right to rent their (still) cheap(er) labor force for a period of ten years.
After that, all installations and production facilities built there by US
corporations become the property of the Chinese government.
What investors in the West fail to appreciate is that China is a case study
in endless imperial strife, centralization of power, and political and
spiritual oppression of its own as well as its assimilated people.
Chinese citizens have been brutally oppressed
for so long that the current economic boom they are allowed to drive and
enjoy is a gift from heaven – and to them, ‘heaven’ is their government.
They consider Western notions of self-government and individual liberty as
quaint and devoid of practical usefulness. A future world dominated by China
therefore will be a far, far different place than the world we now live in.
So, yes, the buying power of your gold and silver will increase under this
new emerging currency regime, but it may come at a prohibitive price –
unless you act now.
Got gold?
By itself, it’s not enough.