'..Warnings of dire long-term consequences simply will not resonate, whether one is an elected politician or PhD policymaker .. I agree with the German view that there is no solution to structural debt problems other than structural reform - and that the problem is global and not just European.'<blockquote>'Financial innovation, leveraging and policy accommodation nurtured the U.S. mortgage finance Bubble, which spurred over-consumption and massive U.S. Current Account Deficits. Our Credit system unleashed upon the world unfathomable amounts of dollar balances, along with the mechanisms and policy doctrines to spur Credit systems all around the world. I has always been my view that it was this profligate financial environment that really solidified European monetary integration. A backdrop comprising a sound dollar and restrained global finance likely wouldn’t have accommodated the type of fiscal and monetary convergence necessary to transform 17 national currencies into an experimental currency unit named the euro.
..
Finance and economics are similarly dangerous. In both “disciplines” it is impossible to convince anyone that what the consensus believes is a really good idea will come back as a very big problem in, say, 10, 20 or even 30 years. Warnings of dire long-term consequences simply will not resonate, whether one is an elected politician or PhD policymaker.
Fannie and Freddie’s market intervention and balance sheet growth back in 1994 set the stage for near Credit system implosion in 2008. And there was Mr. Greenspan’s belief that derivatives work to disperse risk, while hedge funds create a more liquid marketplace. Dr. Bernanke’s references to “helicopter money” and the “government printing press”. Hundreds of Trillions of derivatives. A global “repo” market of tens of Trillions. A global leveraged speculating community now with more than $2 Trillion of assets (and multiples more in positions). A global “reserve” currency governed by a central bank without rules and a penchant for experimentation. U.S. deindustrialization, Current Account Deficits and Fiscal Deficits. Global currency pegs and currency regimes. Many risks are easily ignored for years until disaster strikes.
..
The year 2011 – following by three short years the so-called “hundred year flood” of ‘08 - should put a dagger in the heart of The Mythological Great Moderation. Instead of lower inflation and enlightened policymaking nurturing greater financial and economic stability – they’ve done precisely the opposite.
..
..I agree with the German view that there is no solution to structural debt problems other than structural reform - and that the problem is global and not just European.
I’ll conclude with a couple quotes extracted from Otmar Issing’s insightful op-ed piece from Wednesday’s Financial Times, “Moral Hazard Will Result From ECB Bond Buying:” “Stressing the role of the central bank as the ultimate buyer of public debt should be seen as an indication of the pathological state of public finances not as a sign of strength… Pressing the ECB into the role of ultimate buyer of public debt of individual member states would create the biggest conceivable moral hazard.” '
- Doug Noland,
The Mythical "Great Moderation", December 02, 2011</blockquote>
'..It is high time to admit that the central planning of money has utterly failed.'<blockquote><blockquote>'On top of these alarming economic and monetary consequences, providing monetary financing would break the law – a constitution ratified by all governments and parliaments. Should one be surprised that a number of well-known economists ignore legal principles? Who is disappointed by the fact that numerous politicians and European bureaucrats press hard on the ECB to violate the law? Now even some central bankers follow this line. Imagine: unelected technocrats as they are often called lifting themselves above the law.'
- Otmar Issing</blockquote>
We are of course of the opinion that the flaws of the euro and indeed of all fiat currencies, can ultimately not be rectified by simply sticking to the current planning regime. If we truly want to avert economic crises in the future and the associated endless debates over the alleged merits of employing the printing press, we should simply return money to the free market. A free banking system using a market chosen money and operating according to traditional legal principles – clearly differentiating deposit and loan banking - would once and for all lay all these problems to rest. It is high time to admit that the central planning of money has utterly failed.
- Acting Man,
A Pause In The Euro Area Debt Crisis – Fundamentals Remain Weak, December 1st, 2011</blockquote>
'..Deutsche was the second- largest bank in the world by assets, behind only BNP Paribas SA.'<blockquote>'By any measure, Deutsche Bank is a giant. Its assets at the end of September totaled 2.28 trillion euros (according to the bank’s own website), or $3.08 trillion. In the latest ranking from The Banker, which uses 2010 data, Deutsche was the second- largest bank in the world by assets, behind only BNP Paribas SA.
The German bank, however, is thinly capitalized. Its total equity at the end of the third quarter was only 51.9 billion euros, implying a leverage ratio (total assets divided by equity) of almost 44. This is up from the second quarter, when leverage was about 36 (assets were 1.849 trillion euros and capital was 51.678 euros.) '
- Simon Johnson,
Deutsche Bank.., 2011-12-02</blockquote>
Context ..mainly regarding the respect for life, private property, and the fulfillment of contracts.'<blockquote>'Furthermore, according to our analysis, nothing is more (dynamically) efficient than justice (understood in its proper sense). If we think of the market as a dynamic process, then dynamic efficiency, understood as coordination and creativity, results from the behavior of human beings who follow certain moral laws (mainly regarding the respect for life, private property, and the fulfillment of contracts.)'
- Jesús Huerta de Soto,
Four Hundred Years of Dynamic Efficiency'..the enjoyment of life and liberty, with the means of acquiring and possessing property..'(Private property) Money and Credit - 'Centuries of monetary fiasco..'(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'</blockquote>