Looking to the Dollar, Gold And "Mutti" to Save the World

By Alan Caruba

The most formidable couple in the world during the 1980s was Ronald Reagan and British Prime Minister Margaret Thatcher. Thatcher, a conservative and a woman of iron will, must be looking across the Channel with some amusement to see how her German counterpart, Chancellor Angela Merkel, is literally the only person keeping the European economy from collapsing and, it must be said, taking England and America with it.


The cover article of this week’s Business Week noted that “Merkel is the daughter of a Lutheran pastor. She won a PhD for a thesis on quantum chemistry…though childless, she is known as Mutti, for Mother.” Born in the post-war years, “Merkel’s worldview reflects the German desire for stability. Chaos plagued the German-speaking people long before there was a German nation…Later the hyperinflation of the 1920s and Depression of the 1930s, both of which undermined the middle-class, gave rise to Nazism.”


Plainly said, Angela Merkel is showing the rest of the world why Keynesian economics doesn’t work; that governments with huge “entitlement” programs and a tendency to throw vast amounts of money at their problems invite disaster. If Europe does not plunge into chaos, it will be because she refused to bail it out with the deutschmark.


Meanwhile, the Federal Reserve is moving billions to Europe to ease its lending crisis.


If you read just one book this year, I recommend James Rickards’ “Currency Wars: The Making of the Next Global Crisis” ($26.95, Portfolio Penguin). An advisor to the Department of Defense, the U.S. Intelligence community, and major hedge funds on global finance, he brings more than thirty years’ experience to a book that explains what has gone so terribly wrong and why.


Rickards spells out how the U.S. economic system has been gamed over the years to ensure that “elites captured most of that growth in income and profits.” It is the reason we are just learning that many members of Congress have grown wealthy using insider information, an act that would land anyone else in jail.


“Over time and with increasing complexity, returns on investment in society begin to level off and turn negative…Bureaucracies that started out as efficient organizations turn into inefficient obstacles to improvement more concerned with their own perpetuation than with service to society.”


This is a definition of the U.S. Departments of Education, Labor, Housing and Urban Development, Health, and Energy, along with the quintessential monster, the Environmental Protection Agency. For good measure, include Fannie Mae and Freddie Mac, the two mortgage loan agencies.


In a chapter titled “Endgame—Paper, Gold or Chaos?” Rickards looks at the weakness of the U.S. dollar, pointing out that “As the dollar and sterling were trading places in the 1920s and 1930s, there was never a time when at least one was not anchored to gold.”


“Gold is not a commodity. Gold is not an investment. Gold is money par excellence. It is truly scarce—all the gold ever produced in history would fit in a cube of twenty meters (about sixty feet) on each side, approximately the size of a small suburban office building.”


“Today, under Bernanke’s guidance, the United States is trying to do what England did in 1931—devalue…What is happening instead is that all the major currencies are devaluing against gold at once. The result is global commodity inflation, so that beggar-thy-neighbor has been replaced with beggar-the-world.”


Rickards’ book is a warning against what we are witnessing. “Perhaps the most likely outcome of the currency wars and the debasement of the dollar is a chaotic, catastrophic collapse of investor confidence resulting in emergency measured by governments to maintain some semblance of a functioning system of money, trade and investment.”


The two currency wars of the last century led to two world wars. Rickards warns that “The path of the dollar is unsustainable and therefore the dollar will not be sustained.” A return to the gold standard “offers the best chance of stability.”


Rickards recommends that the big banks be required to become smaller and that derivatives be banned because “they serve banks and dealers through high fees and poorly understood terms.” Derivatives are contracts between two parties that define the value of underlying variables. The “bundling” of mortgages that were then sold as assets is an example and, as the financial crisis revealed, their value was dubious at best, criminal at worst.


“The dollar,” says Rickards, “for all its faults and weaknesses, is the pivot of the entire global system of currencies, stocks, bonds, derivatives and investments of all kinds. It is the store of economic value in a nation whose moral values are historically exceptional and therefore a light to the world. The debasement of the dollar cannot proceed without the debasement of those values and that exceptionalism.”


The coming national election will be a choice between a President who does not believe the United States of America is exceptional and whoever the Republican Party selects to help the nation return to its fundamental values.

© Alan Caruba, 2011

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Comment by Juan Reynoso on December 7, 2011 at 8:41pm


Juan Reynoso's Blog - TeaParty.org


December 7th, 2011

Ron Paul sound the alarm but not body listen

Support Ron Paul http://www.lewrockwell.com/paul/

Fellow Americans, Ron Paul sound the alarm but no body listen, most Americans think that the value of the US Dollar is constant, but the truth is that our Dollar is being devalued, it lost 40% of its value since 2002.

The reasons is the incompetence and corruption of the Washington politicians that are engage in this expending frenzy to bailout and promoted economic stimulus to benefit their cronies at the expenses of the American taxpayers and our country's economy.

Fellow Americans to save our country, we must clean up Washington corruption, we only have few law makers that we should work to keep in our government, our job is to cleanse Washington; United we stand for the future of our country and the economic and welfare of the American family.

Our founding fathers legacy, is our freedom, they give us the Constitution and our bill of rights, that guaranty our liberty to pursuit our happiness through our own endeavor to succeed and become the best we can be. We must learn from our pass, we are not perfect, in the pass we commit acts that today we repudiate, but we give thanks to the ones that give every thing including their lives for what is right and save our country from it's own demise. Our sin always have being greed for money and power and that is what today is destroying our country.

Fellow Americans greed for money and power is destroying our country Washington is engage in making you and me an economic slave, they are promoting a concentration of wealth by exploitation and corruption they commit crimes against humanity and deprive us of jobs. Washington made possible for our US Corporations to go to foreign countries to exploit the people's labor, made goods cheaper than American made goods and compete with small American manufactures and put them out of business creating a huge unemployment, millions of Americans lost their jobs from the legislations pass by Washington to help the multinational corporations to get rich at the expenses of the American people and the exploitation of the foreign workers.

Today we need jobs for Americans, we need to work so

Comment by Norman Zink on December 7, 2011 at 6:08pm

Thumbs down on the European Union.

Comment by Guy Blanchard on December 7, 2011 at 6:04pm

We all better buy gold and silver every month,whatever we can afford. The world banks and mega rich billionaires like soros(soros has bought over elevn tons of gold) are buying gold and silver and are keeping the price down until they control the biggest share of both,then the price will shoot strait up.Get yourselves as self sufficient as possible. Find a good fresh water source as well.India is importing over 50% more silver this year and they want there people to control real wealth while here in america they want us to own paper dollars. get ready my fellow Americans... Gold and silver in 2012 will fly high. Get some now and get prepared. 

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