June 14, 2012

By Kevin Michael Grace

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Gold was up (at press time) $28.30 (+1.8%) for the week to $1,619.60, and silver was down $0.13 (-0.3%) to $28.41. According to Goldcore, “Gold appears to be consolidating after hitting its fourth session of gains, when weak US economic data, in the form of poor retail sales, led to renewed QE chatter. [It] is likely also being supported by real concern about the outcome of Greece’s elections on Sunday.”

Ah, quantitative easing, the Walter White-grade intoxicant demanded by globalists worldwide. Reuters reports June 13, “Many more years of money printing from the world’s big four central banks now looks destined to add to the $6 trillion already created since 2008… As rich economies sink deeper into a slough of debt after yet another wave of Euro financial and banking stress and U.S. hiring hesitancy, everyone is looking back to the US Federal Reserve, European Central Bank, Bank of England and Bank of Japan to stabilize the situation once more.”

“Stabilize,” heh heh. “After four years in which, according to HSBC, the balance sheets of the Big Four have collectively more than tripled to $9 trillion and still not generated self-sustaining recoveries, the question is how long this can keep going on without creating bigger problems for the future.”

The future is now, and stability has left the continent. Just five days after being offered a €100-billion “rescue package,” Ambrose Evans-Pritchard reports that “Spain’s borrowing costs have surged to record highs and are perilously close to the point of no return, threatening a full-blown sovereign crisis unless the European Central Bank comes to the rescue.”

According to Jens Sondergaard of the Japanese bank Nomura, “It is very worrying. Markets are behaving as if the Eurozone is heading for breakup.” Wherever would they have got that idea? Thank goodness Sondergaard has a solution. No prize for guessing what that might be. “He said the ECB should slash interest rates by half a point to 0.5% and ‘pre-commit’ to half a trillion Euros of QE over coming months, blanketing the Spanish and Italian bond markets.”

Meanwhile, Reuters reports June 11, “European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing Eurozone capital controls as a worst-case scenario should Athens decide to leave the Euro.” This is the European Common Market, right?

Almost 40 years ago, back when your columnist was a young man, he heard Malcolm Muggeridge say, with considerable amusement, that, according to the socialists, the solution to the failures of socialism was always more socialism. This would appear to be a general principle that applies to all failed systems.

Fifty years ago, Thomas Kuhn, in his groundbreaking The Structure of Scientific Revolutions, posited that (Wikipedia), “The evolution of scientific theory does not emerge from the straightforward accumulation of facts but rather from a set of changing intellectual circumstances and possibilities.” Crude paraphrase: scientific orthodoxy changes only after the doyens of orthodoxy die. This would appear to be a general principle as well, one that applies to all intellectual change.

For a hilarious but sad example of both general principles, readers are directed to Terence Corcoran’s interview of Robert Mundell, 1999 Nobel laureate in economics. He is known as “the godfather of the Euro,” and it speaks to his bravery that he continues to embrace this sobriquet. As the EU stands on the brink of dissolution, Mundell proclaims, “The Euro is a world currency par excellence. It is second only to the dollar. Indeed, it is challenging the dollar as a stable global unit of account and could have a great future as an international reserve asset. The Euro has passed its youth with flying colours.” He is defiant: “The Euro—barring a political revolution in Europe—is here to stay.” It’s funny how all the Euro’s men have gone all Samson in the temple.

Mundell insists that Europe doesn’t have a “Euro problem.” “If the Government of Canada or Newfoundland or Ontario ran up their public debts, and had big current deficits to boot, would that be a debt-deficit problem or a loonie problem? If California is on the verge of insolvency would that be a US dollar problem or a debt-default problem for California?” If you or I were to assert an equivalency between the politico-economic systems of Canada and the United States and the European Union, we’d be ridiculed, but we haven’t been feted in Stockholm, have we?

Not that Mundell doesn’t admit the EU has a problem. Thank goodness he has a solution. No prize for guessing what that might be. “Ultimately, the European Commission should become the executive power, and the Council should be turned into an Upper House of Parliament, with national representations that take some account of population size.” Yes, of course, the solution to the failures of centralization is always more centralization.

Stock Tips and the Joke of the Week

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