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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of John Browne
August 24, 2011
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Paper Currencies Finally Redeemed for Gold

The basic unwillingness of politicians to face economic and financial realities has caused the United States and European Union to face currency collapse. The politicians are content literally to paper over the problem with massive amounts of newly printed currency. This means that savvy investors, facing major real losses, are turning increasingly to gold. In essence, even though currencies are no longer on a gold standard, they are increasingly being "redeemed" for gold in the marketplace.

For decades, fiscally irresponsible US Administrations have gradually reduced the world's richest nation, with a currency perceived as 'good as gold,' to the position of the largest global debtor, with a debased currency. Furthermore, US stock markets have offered little real return. Indeed, the Dow stands just below 11K, down over 3K points from its all-time high on October 9, 2009. Discounting for inflation shows a loss close to 4K points, or a fall of over 25 percent from its all-time high. Meanwhile, equities in emerging markets have often shown handsome returns.

The recent political wrangling in Washington has damaged the financial credibility of the United States, prompting a long overdue debt downgrade by ratings house Standard & Poor's. This removes a fundamental pillar supporting the dollar as the global reserve asset of choice.

In Europe, the unwillingness of politicians to face the fatal structural flaws within the euro is encouraging a fear-driven economic recession, sovereign debt defaults, a banking crisis, and, potentially, a currency collapse. This is hurting the euro's formerly bright prospects of replacing the dollar as global reserve.

This week's Merkel-Sarkozy summit meeting amounted to nothing constructive. The most popular topic was instituting a Tobin tax on forex transactions. This would, of course, drive financial markets out of the EU to more friendly environments. But more importantly, it leaves the major structural issues of a two-speed Europe unaddressed.

With nothing achieved by the EU's ruling Franco-German axis, European banks are correctly seen as increasingly vulnerable to further EU sovereign debt defaults. Of course, former communist Merkel and her French 'poodle,' the socialist Sarkozy, will find no problem in transferring toxic bank assets to the public purse. But it will require more market anguish before they dare to do it. Once this happens, the euro will be locked on the same railway to devaluation as the dollar.