Federal Reserve

Comparison between the euro and gold.

"Jesus Huerta de Soto (2012) argues that the euro is a proxy for the gold standard. He draws several analogies between the euro and the classical gold standard (1880-1912). Like when “going on gold” European governments gave up monetary sovereignty by introducing the euro. Like the classical gold standard the common currency forces reforms upon countries that are in crisis because governments cannot manipulate the exchange rate and inflate away debt. Therefore, to limit state power and to encourage e.g. labor market reforms he views the euro as second best to the gold standard from a free market perspective. Therefore, we should defend it. He finds that it is a step toward the re-establishment of the classical gold standard."

Interesting.

Recommendation to get your money out of banks now.

"There are only two possible outcomes of the crisis we are now in:
- Either there will now be a run on the massively leveraged (25-50 times) banking system which would lead to no debt being repaid and a deflationary collapse.
- Alternatively, we will now see the beginning of the most massive money printing that the world has ever experienced, leading to a hyperinflationary depression."

It probably isn't that simple. The collapse probably won't come all at once, and at some point it might be hyper-inflationary and at another it might be deflationary. Right now I think deflation is coming next like in 2008. Banks aren't loaning because the economy is still bad and foreign powers continue to hold dollars because dollars appear less bad than other currencies right now. But at some point, foreign countries will dump those dollars, and hyper-price-inflation will result.

Remember when an Austrian, I think it was Lew Rockwell, predicted the Cyprus capital controls would be semi-permanent? He was right.

"While capital controls were intended to be temporary, restoring confidence in the Cypriot banking system is taking longer than initially anticipated by Fitch."

As predicted.