unbacked paper of globalism versus gold standard and golden rule

3-4-17     QE was also a soft bailout of the Mediterranean countries, notably Italy and Portugal…Italy has been protected by Mr. Draghi’s QE program.  Once QE is gone, with nothing soothing to replace it, investors could flee.  https://www.pressreader.com

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Draghi reuters to be distorted_effect
3-20-15              The man at the center of things.

Mario Draghi preferred to celebrate the opening of the ECB’s new headquarters in Frankfurt in an only partly public manner, with hand-picked, well-disposed journalists.  As clumsy and even provocative as this decision was — much more is at stake.

Why this anger?  Why against a central bank?  And why none other than Mr. Draghi — the man who, for three-and-a-half years now, has been doing everything in his power to overcome Europe’s economic crisis, above all in southern Europe?

Mr. Draghi has become a symbol.  A symbol for the euro rescue policies that are hated by large segments of the European population.  There is an impression that the political establishment is no longer the top power on the continent.  Instead, many believe Europe is ruled by a faceless (to the public) body, led by technocrats.  https://global.handelsblatt.com/opinion/europes-shadow-chancellor-179060

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1-22-15     Bond yields are already down to 14th Century lows.  The ECB cannot force them much lower, though Mr Draghi did say cheerfully that it would buy debt with negative rates, prompting audible murmurs of alarm from German journalists.

The decision amounts to an act of political defiance by a majority bloc in the Governing Council – unmistakably a debtors’ cartel of Latin states and like-minded states – and therefore opens an entirely new chapter of the EMU story.  This Latin revolt is to violate the sacred contract of EMU:  that Germany gave up the D-Mark and bequeathed the Bundesbank’s legacy to the ECB on the one condition that Germany would never be out-voted on monetary issues of critical importance.

Nor is the irritation confined to Germany.  The Tweede Kamer of the Dutch parliament was up in arms today, the scene of fulminating protests from across the party spectrum.  “Dutch taxpayers should not be made liable for the debts of the Italian state,” said the liberal VVD party.

Mr Draghi said there was a “large majority on the need to trigger (QE) now, so large we didn’t need to vote”.  That is an elegant way to describe a pitched battle.  No doubt we will learn over coming days just how many hawks voiced their protest, and with what vehemence.

He also said that the decision to pool 20% of the risk through collective purchases was pushed through by “consensus”, the ECB’s euphemistic term for disagreement.  This is an uncomfortable fudge.

It is enough to irritate those in the creditor states who oppose any “fiscal transfers” through debt mutualisation.  Yet at the same time, it means that 80% of the bonds will be bought by national central banks at their own sovereign risk, entrenching the sort of “negative feedback loop” that EU leaders vowed to end in 2012.  It is a step back towards fragmentation.

Chancellor Angela Merkel said in Davos that the ECB’s independence must be respected.  Yet she also warned that its actions must be within “reasonable bounds” and in accordance with EU law.

Mr Draghi was quick to tell us that the entire ECB Council had signed off on the principle that QE is a “true monetary policy tool in the legal sense”.  This gives him some defence against the coming lawsuit by eurosceptic professors in Germany’s top court.

Yet this is a thin shield.  Prior rulings of the court have made it clear that scale matters.  The bigger it is, the more clearly it leaks into fiscal policy and violates the budgetary prerogatives of the German parliament.  This is a sensitive matter.  The court has ruled that no supranational body may usurp the budgetary powers of the Bundestag, for to do so would be to rip the heart out of Germany’s post-War democracy.  This legal battle will drag on.  Let me be clear:  I have argued for at least three years that the Latin bloc should seize control of the ECB’s machinery and call the German bluff, and this is exactly what has just happened.

They have perfect right to do so.  The ECB’s policy has been far too tight even for Euroland as a whole.  For them it has been disastrous.  The slide towards deflation – and contracting nominal GDP – has caused their debt trajectories to spiral upwards even faster.

Yet nobody should have any illusions about the implications of such defiance.  What is at stake is German political consent for the euro project.  Bernd Lucke, the leader of the AfD anti-euro party, called today’s decision an “act of desperation and the introduction of eurobonds by the back door” by the ECB.  The Bavarian Social Christians (CSU) are also furious.  “With this decision, the ECB has crossed the Rubicon,” said Angelika Niebler, the party’s parliamentary leader.  The Bavarian finance minister, Markus Soder, said:  “unlimited purchases of sovereign bonds threaten to bring down the whole system.”   http://www.telegraph.co.uk/finance/comment/11363494/ario-Draghis-QE-blitz-may-save-southern-Europe-but-at-the-risk-of-losing-Germany.html

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6-12-13    The German plaintiffs in Karlsruhe argue that this programme violates the ECB’s mandate.  It fell to Mr Weidmann (Bundesbank president) to argue their case.  The central bank is supposed to make only monetary policy.  Buying government bonds, he said, amounts to financing states and is thus a fiscal matter….if debtor countries defaulted, the ECB would make losses and would call on its 17 shareholders, the central banks of euro-zone countries, to pay.  The Bundesbank is the largest shareholder.  Ultimately, German taxpayers would foot the bill, yet Germany’s parliament never voted for the expense.  This, goes the argument, is unconstitutional.   http://www.economist.com/blogs/charlemagne/2013/06/germany-and-euro

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12-19-11    The euro is “irreversible” and will overcome the crisis, European Central Bank chief Mario Draghi said in his first appearance in front of the European Parliament’s economics committee on Monday (19 December), while making the case for austerity and fiscal discipline.  https://euobserver.com/economic/114684

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11-3-11      In his highly anticipated first appearance as head of the European Central Bank, Mario Draghi Thursday (3 November) indicated that there will be no radical policy change under his watch, in particular ruling out becoming the lender of last resort for eurozone governments.

“What makes you think that to become the lender of last resort for governments is actually the thing that you need to keep the eurozone together?” he said in response to a question on the issue following a meeting of the eurozone bank’s governing council.  “No I don’t think that is in the remit of the ECB.  The remit of the ECB is maintaining price stability over the medium term,” he added.

Some commentators suggest the eurozone debt crisis has deteriorated to such an extent that only blanket coverage by the ECB, which theoretically has an unlimited amount of money, can stop markets from further driving up government borrowing costs – already at almost unsustainable levels in Italy, the eurozone’s third largest economy.  https://euobserver.com/economic/114163

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3-29-12    We live in a time when a tiny handful of people have their fingers on a button that can conjure trillions of dollars, euro, yen, and renminbi out of thin air.  In the United States, it comes down to one man.  Just one.

With a single decision, he controls the lever that dominates the entire economy.  When you control the money, you control everything–financial markets, consumer prices, risk perceptions, investment habits, savings rates, hiring decisions, pay raises, sovereign debt, housing starts, etc.  One man.

This irrational, arrogant system presupposes by design that a central banker is smarter than everyone else; that markets are incapable of determining appropriate risk and value; that he is more effective at allocating our time, capital, and labor than we are.  http://www.businessinsider.com/are-there-any-currencies-backed-by-gold-2012-3

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Historically societies around the world frequently found gold and silver to be the most suitable commodities to serve as money.  Why?  First, people value gold and silver whether they are used as a medium of exchange or not.  Second, those metals have the natural advantages of being durable, divisible and portable.  Third, it is easy to standardize the quality of each unit.

A government’s perpetual tendency to amass more power impels government leaders to establish a monopoly over money since, as the saying goes, “money is power.”   To facilitate increases in government spending (i.e., the expansion of government power), sovereign powers replace genuine money with fiat money–that is, paper money or, in the digital age, unseen binary data bytes.  In doing so, governments and their central banks divorce money from its organic origin as the most marketable commodity in a society, independent of government authority for its value and acceptance as the preferred medium of exchange.

…a worthy cause:  to provide a viable international currency that would facilitate and promote international commerce.  The irony of the euro is that Europe had such a currency over a century ago:  the gold standard.  Modern man wants to have his cake and eat it, too, so the Eurocrats tried to conjure up a currency that would confer the benefits of gold money without imposing the discipline of gold money.  They are finding out most painfully that there is no such magical “money.”  The only solution is the one that they are not ready for:  to live within their means and to accept the discipline that accompanies the use of honest, genuine money–gold.    https://www.forbes.com/sites/markhendrickson/2012/06/21/the-euro-is-a-frankenstein-currency/#7bc3b69169a9

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1-22-15      So after falling hard in 2013 and treading water for most of 2014, the euro price of gold has gone parabolic in the space of a couple of months.  This sudden rather than gradual awakening is the standard pattern for a currency crisis, mainly because it takes a long time for most people to figure out their government is clueless and/or lying.  But once they do figure it out, they act quickly.

Gold in euros Jan 2015

Europe’s gold chart isn’t as dramatic as Russia’s (see it here) because Europe doesn’t depend on oil exports and the euro, while dropping versus the dollar, isn’t yet in free-fall. But with another trillion euros due to hit the market in the coming year, and a series of currency union-threatening political crises in the pipeline, the flight to safety could easily become a stampede.       http://dollarcollapse.com/gold/this-is-what-gold-does-in-a-currency-crisis-euro-edition/       (Gold is presently at 1162 euros/ounce, spot price.)

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Letter of 1-9-1789 to Jabez Bowen:  “But if in the pursuit of the means we should unfortunately stumble again on unfunded paper money or any similar species of fraud, we shall assuredly give a fatal stab to our national credit in its infancy.  Paper money will invariably operate in the body of politics as spirit liquors on the human body.  They prey on the vitals and ultimately destroy them.  Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.”      -G. Washington

While the economy as a whole has expanded at a rate of under seven percent in recent years, the legislature’s 100 or so dollar-billionaires have seen their cumulative wealth jump 64 percent since 2013 when Xi assumed the presidency, Hurun said.   http://www.dailymail.co.uk/wires/afp/article-4278662/China-counts-100-billionaires-Communist-legislators.html
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  19% of USA seafood consumed is imported from China; 90% of USA seafood consumed is imported.    http://mercurypolicy.org/wp-content/uploads/2013/12/fitzgerald_ngo-hg-mtg_dec-13.pdf
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