Saving Europe and Disposing of Gold
Pj de Marigny, DITMo Strategie
Director, GARP, S. California Chapter
05Sep2011, Newport Beach, CA. Is there a panacea for Europe and the United States to avert an economic meltdown?
For the United States, supply and demand side solutions include extending unemployment benefits, employment tax credits, rolling back regulatory burdens, Fed monetary manipulations and infrastructure spending (a federal bank has been tried before and is even more susceptible to fraud and waste than the stimulus failure).
For Europe, restructuring sovereign debt, austerity, and nationalization of banks seem to be the course. But what will work? Is there a panacea?
First, the U.S. should face the fact that the Fed’s role of balancing monetary policy with the treasury (fiscal policy) is now impossible. QE, manipulation of interest rates, reserves and paying interest on resoerves, discount window, TARP, and repo securitization – we’ve heard it all – but there is no cushioning a fall from 1000 feet. Creating law through regulatory regime without understanding adverse impact to trade and innovation increases business volatility (risk) and is not conducive to entrepreneurialism (releasing the power of creativity) to compete effectively. Last, our political, legal, and tax system are antiquated and are constraints to the free flow of capital’s best use. Jefferson today would never be elected, he would obviously be an independent. We do not have runoffs in the U.S. the virtually ensures an intractable fiscally irresponsible Congress. What Congress won’t legislate, the executive branch empowers agencies to regulate. The tax regime is a ridiculous mechanism for funding government and the budget process is just as broken. So, what the government overspends, the Fed monetizes and the economy grows to compensate to offset devaluation of the currency. That balance can be continued until the debt can no longer be monetized to the degree of growth. That is where the U.S. is today.
For Europe, the problem faced is more simple. Europe has a monetary union without a political one. Austerity imposed on its constituents is like demanding fish from a country without fishermen. Monetary union was doomed the day the eurozone voted down political unity. Brussel’s answer was to first save the failing sovereignties with a 30% paydown and restructuring. Next, Lagarde proposed to nationalize banks since the banks are the major monetizers of sovereign debt. Ex a central bank power to control money supply, this should sound familiar and is the course of the United States.
The panacea for both the Eurozone and the United States (and the Americas) is the formation of a New Roman Empire, a political and monetary union into a new central currency that is regulated by Basel and authorized under BIS which constituents are Occidental, EMEA, and Oriental central banks. The U.S. currency simply cannot be sustained independently by unconstrained institutions of Congress’ fiscal policy, the Executive branch’s regulatory and tax regimes, and the Fed’s monetization powers.
The eventuality of these meltdowns is the nationalization of the banking industries in the U.S. and Europe, but under auspices of a new political and monetary regime: A New Roman Empire. The Euro and eurozone simply cannot survive in its present form for more than three years. The New Roman Empire as a political consortium with a monetary consortium under new Basel guidelines can create a central currency that would resolve the threats of monetizing unfunded and current debt for Europe and the U.S. The probability of the Euro failing into a new unfiated currency is the same probability of gold being valued by its industrial use. At that point, investors will be throwing their gold on the streets. The eventuality of gold’s value falling off a cliff is certain, it is more a matter of timing. *.*
