January 26, 2015

Oiling the EU’s economic engine

Posted in Sunday Business Post · 116 comments ·
Share 

Two major and interrelated events occurred on Thursday. The first was an Italian coup d’état at the heart of the German monetary establishment in Frankfurt.

The second was a changing of the guard in Riyadh, with the death of King Abdullah in Saudi Arabia. It remains to be seen which event will have greatest impact on your life.

Let’s look at the Italian ambush in Germany first. Thursday was the day when Germany realised it doesn’t call all the shots. It no longer sets the ECB agenda. The ECB is not a multilingual version of the Germans’ beloved Bundesbank.

After all the monetary foreplay of recent years, Germany is now in bed with all sorts of deviants – the Greeks, the Spanish, the Italians – who are quite prepared to engage in unnatural financial acts for their own pleasure, and poor old Germany can only hold its nose and go along with it.

For the uptight German monetary prudes, the “unnatural act” is printing money. The Italians, Spanish, Greeks and Irish are now being allowed to experiment in a way that would make the average German blush.

For German people, money is considered a “public good”, like fresh air. It should be protected by treaties and, like the environment, money should never be interfered with. This is the Weimar legacy and obviously the memory of Hitler who looked upon treaties as pieces of paper to be broken at will. Germany never wants to do that again.

But for the rest of Europe, money is, in contrast, regarded as a “tool” to be used in a crisis to lever the economy onto a different growth path. So if there isn’t enough money in circulation, you print more of it.

This is what the Italian Mr Mario Draghi is doing, as Italians always do in a crisis – he’s printing money.

He’s not actually turning on the printing presses, but he is giving the banks much more capacity to lend. It is up to the banks now to use that money – €60 billion a month – that Mr Draghi is giving them. If they do start to lend, it’s going to make a huge difference.

So the banks have to become the spigot rather than the bottleneck.

It worked in the US, maybe because America has an inherent ability to reinvent itself economically. The Americans believe in the words of Martin Luther King: “The extreme urgency of now.” Does Europe?

The way we will know if this QE is successful is if we see, over the next few months, banks throwing money at consumers and investors to either buy or invest.

It means hearing ads on the radio and TV offering credit, getting letters through the post and having car companies lobbing finance at us. If you see this, then the policy is working.

Our world will have to feel like 2002-2008 again. This may not sound too sensible given what we’ve been through, but that’s what is going on.

The main impediment to this policy working is the fact that there is still too much debt in Europe, which hasn’t been dealt with.

A cynic might say that without debt forgiveness or debt restructuring we are papering over the cracks and all we have is a policy where bust banks lend to bust governments with “made-up” money.

If debts – both national and personal – aren’t dealt with, people will have too much debt and won’t be prepared to borrow and the banks will have too much bad debt and they won’t be willing to lend.

Some form of debt relief would make quantitative easing (QE) much more likely to be successful. This is exactly what Syriza wants in Greece and it is an entirely logical move. This is not an extreme position but is straight out of the most orthodox economic textbook.

Without debt relief, it is hard to see QE working as well as it did in the US, where it was combined with debt relief, a fiscal expansion and massive early bank recapitalisation.

But it is a start.

The reason it’s a start is because deflation is stalking Europe and the authorities have to act. This is where our friend in the desert comes in.

Look at the chart showing the collapse in the price of oil and the collapse in the euro against the dollar. They almost move in tandem.

Crude vs EURUSD

Why is this? It is because a fall in oil prices drives down European prices, which in turn makes it more likely that the ECB will not hit its 2 per cent inflation target. The less likely this is, the more the Europeans will deploy QE and the more the euro will weaken.

The death of King Abdullah exposes the dead hand of the Saudi ruling family on the levers of power in the Gulf. His ten-year reign was marked by bouts of ill-health and now his 79-year-old brother Salman takes over as king, though he is suffering from possible dementia himself. If anything sums up the sclerotic nature of the world’s most important energy supplier, it is this hereditary vice.

The Saudis are intent on keeping the price of oil low for some time.

Current turmoil in global oil was triggered the moment it became known that Saudi Arabia had decided to steeply discount its crude.

This was to show America and its so-called shale revolution who’s boss. It was also a reaction to America’s increasing cosiness with Iran, Saudi Arabia’s enemy in the region. Saudi oilfields are profitable at much lower oil prices than anywhere else.

All this compromises the ECB’s job which is about getting the price of things to move up, not down. If the problem is deflation, the solution is inflation. And of course, when there are huge debts, if the price of everything is falling, then income is falling. And this means that debt expressed as a percentage of income is rising.

All this means that the manifesto of the so-called radical party in Greece is the only one that makes sense in today’s Europe. But you’d never think that from the mainstream commentary or from the insults being hurled at Syriza by the European elite.


  1. Grey Fox

    I am listening to the insults and knockbacks pouring in even at a local level on our own Newstalk Breakfast show where Tsipras is being almost ridiculed for apparently never holding down a regular job, so he doesn’t fit in the predetermined box he is supposed to fit into, look at how well the historical square pegs have managed the affairs of Europe through the crisis, ha, my money is on giving the new blood a bloody good chance, everybody deserves two fingers at some stage in their life, the Euro Project is no different, Tsipras is coming Merkel and I get the feeling he is open minded towards wearing protection.

    • Mike Lucey

      I imagine Mrs Merkel will ask Mr Tsipras what he intends to do about the €20 billion stashed away in Swiss banks by many of the Greek professional classes. It would not surprise me if he is already on the job.

      (From the Net)

      ‘In the last quarter of 2005, participation in tax evasion reached an estimated 49% of the population, while in January 2006 it fell to 41.6%. A study by researchers from the University of Chicago concluded that tax evasion in 2009 by self-employed professionals alone in Greece (accountants, dentists, lawyers, doctors, personal tutors and independent financial advisers) was €28 billion or 31% of the budget deficit that year.

      The Tax Justice Network has said that there are over €20 billion in Swiss bank accounts held by Greeks.The former Finance Minister of Greece, Evangelos Venizelos, was quoted as saying “Around 15,000 individuals and companies owe the taxman 37 billion euros”.Additionally, the TJN puts the number of Greek-owned off-shore companies to over 10,000.’

    • SMOKEY

      The morons who host, I mean morning hosts, on “News-talking points Breakfast” are spoon fed their scripts, and by the low brow content, it is written by the college interns who run the station.
      And the self righteous “whiny snot nosed”, “AIB forced me to sell the farm” former politician/puke face, is one of the most boring creepy dullards I have ever heard, Christ man, I cant stick him. So quoting that propaganda machine as a legitimate news source is folly. Garbage. Oh and his child protégé with an equally weak radio voice grates my nerves as well. All Radio in Ireland is a dull and listless wasteland.

    • Morning Colin. Is the Walkie Talkie finished now? If so, what job are you on now?

      • Colin

        Adam, it is 99.99% finished. I am on holiday now. In Limerick this week, then off for some winter sun, then back to London to review opportunities, then away for more winter sun, and then back in London looking at what work opportunities come my way. It’s great holidaying in the Eurozone at this moment in time, the £ stretches a lot further than has been the case since 2007.

  2. CallerNJ

    And if my saved euro are eroding (I live outside the eurozone) what must I buy?
    Who cares, but it is a small factor.
    More important is what will all the savers inside the eurozone buy, with euro worth more today than tomorrow?
    This will indeed help spur inflation but then kill the deposits and tier 1 capital in the banks…
    That bank recapitalization we talk about in the US is sure to follow.
    Once again in modern economic history it seems the US has called this one correctly.
    When will Europe wake up and see that they need a more streamlined system that can respond to immediate concerns.
    Europe is arrogant and all too comfortable in its power of worlds largest consumer, meanwhile the rest of the world slowly and deliberately passes it by and we’ll wake up on tomorrows world with Asia and North America in the driving seat with Europe ranked alongside Latin America and not having a big voice anymore in the G-Summits

  3. michaelcoughlan

    Hi,

    A pure pleasure to read this article. Such an expert understanding of the Realpolitik driving these bizarre economic events.

    “It worked in the US, maybe because America has an inherent ability to reinvent itself economically”

    Spot on. All players in the US know when the music stops the creditors get a phone call and are told the truth. Then the music starts again and the creditors get back to allocating capital. The creditors know this from the start which means they diversify their capital to ensure it doesn’t ALL get wiped out. It’s more difficult to achieve this now as there is a bull market in both the bond and equities markets but real savvy investors are buying land.

    Don’t forget your Keynesian heritage. The fiscal expansion is very important and necessary to do in counter cyclical times but must meet a number of pre set criteria as far as I can see which are; The infrastructure built must add REAL value to the economy with a REAL ROI. It MUST not overburden the taxpayer ie it mustn’t simply be a wealth transfer of taxes gathered in that real surplus value must be added so the citizen gets value for his money, it mustn’t involve an INCREASE in the money supply in other words the money must be sourced from existing capital markets and simply backstopped by Govt. guarantee which will involve an added onus to ensure an adequate ROI.

    I don’t think Draghi has insisted this 1 trillion has to be leant out nor do I see any attempt to write down debt or reduce the taxation burden on citizens. In that scenario accelerated deflation will be the result and sooner or later the market will force these fuckers do do it anyway.

    Michael.

  4. Good on you David and go Syriza. Debts that can’t be paid won’t be paid. I spoke to an old friend in Athens yesterday morning before he went to vote and he was voting for Syriza. He’s one of the smartest people I’v ever met in my life so I trust his judgement. Hopefully this is the dawn of a new day for Europe.

  5. Con Burke

    David, why aren’t the EU fiscal policy makers encouraging an aggressive policy of capital infrastructure projects. Is this not the way to stimulate the economies again and get cash flowing in the system? (Use the extra cash from QE to fund the projects?)

    • Yes, I’ve been thinking the exact same thing. At the ECB they seem to like putting the cart before the horse. We know from past experience with the banks that if they are given more capital, they do not necessarily then lend more -past behaviour predicts future actions. These potential capital projects should be fast tracked such as the tunnel from Finland to Estonia (if good cost/benefit ratio).
      ‘Thursday was the day when Germany realised it doesn’t call all the shots. It no longer sets the ECB agenda. The ECB is not a multilingual version of the Germans’ beloved Bundesbank’ – Spot on – it took them a long time. Germany at the moment only has around 24% of Eurozone population and should be 23% if Romania joins Euro in 2019.

      • michaelcoughlan

        “Thursday was the day when Germany realised it doesn’t call all the shots. It no longer sets the ECB agenda”

        I agree with mcwilliams here. I feel the germans could give the ero the two fingers as a result.

        Michael.

    • Mike Lucey

      @Con

      Exactly and an obvious infrastructural project would be an Ireland – England tunnel, Rosslare – Fishguard possibly the best route.
      http://en.wikipedia.org/wiki/Irish_Sea_fixed_crossing

      ‘The Institute of Engineers of Ireland’s 2004 Vision of Transport in Ireland in 2050 imagines a tunnel to be built between the ports of Fishguard and Rosslare[3] along with a new container port on the Shannon Estuary, linking a freight line to Europe. This report also includes ideas for a Belfast-Dublin-Cork high-speed train, and for a new freight line from Rosslare to Shannon.’

      Its called ‘joined up thinking’, something that is sadly lacking among politicians.

      • Con Burke

        Spot on. This is where the money should be going. Projects like this, albeit unprecedented in size and scale for a country of our size, would provide the fuel to keep our economy smoldering away nicely for the next 15 years at least. Even one of these projects would create thousands of direct and indirect jobs.
        There is risk however, in that an economy could become to reliant on public infrastructure projects, but like any risk it can be managed.
        For example, schedule the aforementioned list of projects to dove-tail over a 25 year period.
        I’m not old enough to remember the early days of the EU, but my historical knowledge tells me that projects like this, part EU/ECB funded, is how Ireland achieved its first-world status initially. Why did this suddenly stop. It was working.
        (N.B. Copy and paste ‘Ireland’ for any other EU peripheral country, including Spain, Portugal, etc.)

  6. Treaty of Rome

    The precision of Draghi to determine the additional monthly value over the public estimates was spot on to make his own mark to be all his own and in an Italian way giving a panache and a surprise that makes everything else irrelevant . He reminded the Germans that the EU proper originally was the Treaty of Rome and that it is his business only to make these decisions .This is a Villa D’Este moment where spaghetti showers carbonara , bolognese and gnocchi for everyone.

  7. Chuairt a Mheán Lae

    Life is not about the ‘extreme urgency of now’ and never will be .The destination will arrive always and in good time .There is no such thing as urgent business , only people in a hurry and if you feel to be in a hurry I will not bother you . Why should I ? An Egg takes the same time to boil no matter unless you settle for another palate .Why change when you don’t have to ?

    Life is an experience in a journey not the destination in itself . Embrace what you have and in style and do it right .

    • Mike Lucey

      @John

      The boiled egg analogy is a good one. However it is possible to boil an egg in 55 seconds using a microwave oven. The downside is that its advisable to leave the egg sit in the microwave for a further 4 minutes plus before touching it otherwise it will likely explode! Yes, the old way is the quickest and safest.

    • 33square

      “When a task cannot be partitioned because of sequential constraints, the application of more effort has no effect on the schedule. The bearing of a child takes nine months, no matter how many women are assigned.”

      Brooks, Frederick P. (1996). The mythical man month essays on software engineering

  8. Friends Families & Fools

    I believe that there is an opportunity where deposits are concerned and that this decision by the Central Bank Regulator has not been fully looked into . David has in the past explained how investments in residential property does not work for you and does not create jobs in the long term .

    I believe that a formula should be devised to use the deposit differently that it is made to work and create jobs . At least that part of the sum of money required to acquire the home.

    An example can be ( say ) allow the deposit be raised by who you know ( friends family and fools ) and the deposit is used to purchase shares in regulated approved start up companies by Enterprise Ireland and that the lending bank matches that figure . In this case these shares and the home are used as security for the 100% bank loan given by the bank .

    In this case the home owner can call on the investment should he fail to make repayments .This should not happen if properly assessed .Home costs can only be accepted by banks within an approved narrow gauge price variance acceptable to the public .

    This could be a catalyst to new homes and new jobs and money creation by banks where everyone is happy .

    • EugeneN

      So what about the people with saved deposits – do they have to put the 20% deposit into shares in start up companies?

      An utterly absurd idea which would not just put a rocked under house prices, since everybody can now get 100% mortgages again, and will end up in defaults because most start up companies, regulated by enterprise ireland or not, will not make much money.

    • Where there is a Will there are Taxes

      Where there is a Will there is a Way

  9. EugeneN

    I was reading Karl Whelan ( ex CB) who reckons there is no QE for Ireland since we have already maxed out in the number of non-locally held financial instruments.

    So this will have no effect here. If the southern economies grow then it may in fact reduce housing demand. In any case the 20% deposit should start having an effect but smart money should wait until supply increases.

    • Pat Flannery

      But the Irish Government can use Government-owned AIB to borrow from the Irish CB (QE) and buy back “non-locally held financial instruments” making them “locally held” and at lower interest.

      Is not owning your own debt the whole point of QE?

      If QE were available when the Irish Government “maxed out in the number of non-locally held financial instruments” would it not have chosen QE over high cost market borrowing? Now that it is should our Government not refinance that debt by buying it up on the open market?

  10. Pat Flannery

    Pouring oil into an engine’s oil compartment knowing that it cannot reach the engine’s moving parts suggests either an incompetent mechanic (Draghi) or a dishonest garage (the ECB).

  11. David, there is a real difference between the QE in the US and the UK. As a compromise with Berlin the ECB will only be taking 20% of the risk, leaving the other 80% with the national banks such as the Bank of Ireland.

    Leaving aside whether QE has or has not been a success who is going to decide which debt to purchase? Will it be the 20% or 80% risk taker?

  12. Pat Flannery

    The biggest contrivance Syriza will face is the fact that in 2010, in anticipation of a Greek default, the ECB bailed out the Greek bondholders by buying up most Greek debt, which it still owns. The ECB will now plead its charter which forbids it granting debt relief, because that would be a gift of public funds.

    Thus the system rigged itself in advance against Syriza or any copycat parties.

    The battle for democracy is on. It is ironic that it will be fought in its birthplace, Greece.

    • corkie

      Ah yes, the wealth destroyers, John Key and his ilk, are long departed this place and are spreading poverty elsewhere. Now the battle is on to see which taxpayer will take the bigger hit. This is not the battle for democracy. That war was lost many years ago, but the bloodshed..

      But getting back to Greece, maybe a bit more time “pegged” but outside the ERM might have been a good idea. Only one year (1997) for a place like Greece.. Some one was asleep at the wheel. Bulgaria is still in that limbo four years on. You get the feeling the masters doesn’t want to repeat their mistakes.

      Maybe the best solution for Greece is to take the hit and get the hell out of the Euro and maybe come back when the unionist have a few more clues about what the hell they are doing.

      • Pat Flannery

        My reading of these guys is that they will fight like tigers to stay in the Euro. They have no choice. You cannot exit one currency without having another currency to exit to. The drachma no longer exists. You can’t go from somewhere to nowhere.

        For Greece to exit the Euro would be economic suicide. Those who are calling for Greece to exit the Euro are doing what Bertie urged on those who criticized his boom getting boomier delusion, to go to their room with a bottle of whiskey and a loaded pistol.

        These new Greek politicians are much smarter than that. They know that the political technocrats can prevent financial contagion by financially isolating Greece, even to the extent of Cuban or Iranian style sanctions.

        But what nobody can isolate or quarantine is the much deadlier disease of POLITICAL contagion, as happened in 1848 all across Europe. The Greeks have a better hand than the Europeans yet realize. All Syriza has to do is play that hand well.

        • corkie

          The mood music from Brussels/Paris: “Greece is in the eurozone, it wants to stay in the euro zone and it WILL stay in the eurozone” So says Mr Holland. But Yanis and Alexis are not so fast at letting us know what they are thinking. Good move. It would be mad to throw away aces at the very start of the poker game that we are about to witness. Their mood music is “anti austerity” and bailout critics in charge. Meanwhile in Ireland, Mr Noonan is throwing out good ideas that might work anywhere. That contagion you mentioned has already started. This could get interesting alright.

  13. White is black and black is white

    Not so long ago the oil cartel was scorned for putting the price of oil up. Everybody screamed at how it ruined the economies by inflating the cost of everything. BAD< BAD< BAD

    Well surprise, surprise.
    Everyone is now blaming the oil cartel for lowering the cost of all items by lowering the oil price. BAD<BAD BAD>BAD for the same reason

    The world is gone mad. virtues are a sin and sins are a virtue.

    This is not as people proclaim capitalism. The is no capital to invest. Rather it is debtism , everything funded by credit.

    Those who are profligate wasters use the savings and capital of the prudent and waste it too.

    There is no wealth creation in this mix, just destructive consumption and waste.

    We live in Orwellian times. We are led astray by our leaders and prominent officials. Lemmings headed over the cliff top!!

    • michaelcoughlan

      debtism.

      Good man Tony. New word for the English lexicon and a brilliantly succinct description too.

      Michael.

      • now you make me blush, Michael!!

        • michaelcoughlan

          Thank god you have stopped wearing the ear off us about gold or central banks.

          Ha Ha.

          Best regards,

          Michael.

        • If you look carefully at every sunrise it is preceded by a golden glow in the sky as a promise for a glorious day.

          My blush has a golden hue to it Michael as it exudes good health.

          Likewise the financial problems will be made healthy by the adherence to the discipline enforced by a golden international currency. Then the world will live in harmony in a golden age.

      • Mike Lucey

        As Abe Lincoln said,

        “The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.

        Corporations have been enthroned, and an era of corruption in high places will follow. The money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed”.

        • michaelcoughlan

          Thomas jefferson;

          “”God forbid we should ever be twenty years without such a rebellion. The people cannot be all, and always, well informed. The part which is wrong will be discontented, in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty. …
          And what country can preserve its liberties, if its rulers are not warned from time to time, that this people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as
          to the facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time, with the blood of patriots and tyrants. It is its natural manure.”

          • Mike Lucey

            “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford

            He never said a truer word. I am amazed at people’s response when they learn how currency is created.

    • Yep, it was a good post Tony, meant to say so myself too.

    • @Tony most economist applaud QE we set fire to €500 Million before Christmas and now we applaud The Printing Of More money,?? Isa spooked Tony, min marrying Min ??? Wimen marrying wimen, the end Is coming closer,??

  14. michaelcoughlan

    Hi all,

    To better understand the complete fucking madness now enveloping Europe I have devise a very simple explanation to highlight it.

    Many ordinary punters have now got access to trade the markets by simply opening a spread betting account with any one of the myriad now available over the internet. It is worth remembering that the much of the bubble that popped in 1929 was ordinary joes running into the stock market with the profits they made during the roaring 20′s but I digress.

    When you place your bet on whatever item you choose, commodities, equities, bonds, currencies etc you automatically use leverage which is borrowed money to fund the bet from the spread betting provider. This money is charge to you at 2.5% over libor say 3.5% total. You can leverage a 1000 euro account up to 10000 in some cases.

    This is where it gets interesting. Since most punters are looking for a quick buck gain they are only interested in the capital gain NOT the dividends as in some cases like currencies or metals no dividend exists. At the moment the total cost of funds NOT including the spread charged (which is the other way the spread betting company makes its money) is around 3 to 4%. Thats just for ordinary punters. Hedge funds get the money a lot cheaper.

    When the cost of funds rise the people betting have to close (sell) their position and when they all do it together thats when the crash will happen. The great reset. The money is being printed to be given to these guys to prevent this from happening.

    Any discussion around QE and the hope that money therefrom being lent into the productive economy wasted because its only so much intellectual verbiage.

    Michael.

  15. Typical politician or central banker

    Subject: Fwd: Ed Miliband

    Subject: Vote Labour !!!!!!

    Ed Miliband walks into a bank to cash a cheque. “Good morning”, says Ed, “could you please cash this cheque for me?”
    Cashier: “It would be my pleasure Sir, but could you please show me some identification?”
    Miliband: “Truthfully… I did not bring my ID with me as I didn’t think there was any need to. But hang on! I’m Ed Miliband, Leader of the Opposition and of the Labour Party!!!”
    Cashier: “Yes Sir, I know who you are, but with all the regulations and monitoring of the banks because of impostors and forgers etc, I must insist on seeing some identification”.
    Miliband: “Just ask any of the customers here at the bank who I am and they will tell you. Everybody knows who I am!”
    Cashier: “I’m sorry Sir, but these are the bank rules and I must follow them”.
    Miliband: “I am urging you please, to cash this cheque for me”.
    Cashier: “Look Sir, this is what we can do. One day Colin Montgomery came into the bank without any ID. To prove he was Colin Montgomery he pulled out his putter and putted a ball along the floor and into a small cup. With that sort of skill we knew it was Colin Montgomery and we cashed his cheque. On another occasion, Andy Murray came in without any ID. He pulled out his tennis racquet and lobbed a tennis ball straight into my teacup with such a spectacular shot that we all knew it was Andy Murray. Ed Miliband stood there thinking and thinking and then finally says, “To be honest, there is nothing that comes to my mind. I can’t think of a single thing that I’m any good at.”
    Cashier: “Will it be large or small notes you require Mr Miliband.

  16. You might enjoy this one Tony:

    Volatility, Deflation and Manipulation: A Response to Bitcoin’s Critics

    http://www.coindesk.com/volatility-deflation-manipulation-response-bitcoins-critics/

  17. michaelcoughlan

    Bill Still says it even better than you Tony;

    https://www.youtube.com/watch?v=o1WBhKWJjAk

    • Bill Still, is a character, I’ll give him that much.

      Just over a year ago (December 2013) he was instrumental in the pump and dump scheme of a little known crytocurrency called Quark.

      Loads of people got burned, I think he earned a lot. Hilarious it was.

    • Good video by Bill this time though.

    • He has a teleprompter. Never once was he looking at the audience. however I’ll give him the fact that he gets all that he says correct.
      I saw him in Bray last year. During his mostly excellent presentation he took several swipes at the so called tin foil hats, the goldbugs.

      during question period afterward I complimented him on his presentation
      And suggested he was alienating a large constituency who otherwise agreed with him.

      He did not seem pleased and if I read his eyes correctly he was downright hostile under the pleasant expression! There was opportunity to chat in the hall and he studiously avoided me. He has an ego problem.

      He has no method stated that suggests how to control the politicians from producing too much money. I think he is not against that sort of inflation. However that is the one thing when dealing with a national currency that must be addressed.

      Private currency like Bitcoin has built into it the same safeguard a gold backed currency provides. I know of no others that do. Bitcoin does avoid government oversite and thus may do the job in the end.

      Note: Bitcoin is restricted in the total amount being produced just like gold. It also agrees that it is not required to increase the money supply in order to build a growing wealthy economy.

      From everything David has written, he disagrees.

      • michaelcoughlan

        “He has no method stated that suggests how to control the politicians from producing too much money”

        I agree here. He says in his video the secret of oz its who controls the quantity is the issue. But the penny never drops with him that if you go back to the government issuing interest free money they will over issue it to suit their own agenda. It’s a real fly in his argument.

        Michael.

      • michaelcoughlan

        Hi,

        The trouble I have with bitcoin and any currency like this is there is nothing to stop the FED buying over half the amount relatively cheaply at its inception and repeatedly dump them buying them back at a discount to suit a political agenda and make a fortune in the process.

        Also it has no pedigree unlike metals and those bitcoin wallets can be lost easily with huge sums of money in them.

        However a merging of the blockchain technology with gold or something like that will probably evolve and achieve true stability in time and this if it happens may be very worthwhile.

        Michael.

      • cooldude

        You are correct Tony. David regards money as simply a tool however it is a tool which is used to transfer wealth from the 99% to the 1%. That is what QE is really about. Despite the constant clamor about it’s success in The UK and US all it has done is to increase the amount of people on part time zero hour contracts and lower the amount of people on decent paid jobs. It doesn’t achieve any real form of economic progress but it does produce asset bubbles which are how the elite make their money.

        The other tool they use to disguise how crap things really are is the old favorite of war. This is definitely back on the agenda big time although in truth it never really went away. Here is an interesting piece by former secretary to Reagan Paul Craig Roberts which looks at the real purpose of expanding the money supply

        http://www.paulcraigroberts.org/2015/01/25/freedom-america-europe-pcr/

        • cooldude

          Here is a film on American history you might like Tony. It goes into great depth on who is really running the show and how they do it. Very well researched but it is over three and a half hours long so watch it over a couple of days. Adam I think you will appreciate it as well and anyone who is interested in real history.

          https://www.youtube.com/watch?v=U1Qt6a-vaNM#t=841

          • Thanks cooldude, will definitely watch it.

          • easun55

            great docu watched it last week .
            rarely comment but this is a must watch .
            This spells out the 100 year mess for the hard of hearing .

          • This stuff is hard to watch or believe – full of irrelevancies such as ‘Prince Harry dresses like a Nazi on occasion to honour his German heritage’ and inaccuracies such as ‘the Duke of Edinburgh’s brother was the head of the SS’ (in fact, his brother-in-law was a low ranking officer by all accounts).

            He should stick to relevant and verifiable facts.

            The greed of bankers over the ages is certainly true – to the present day as we all know – but I think I’ll be avoiding any ‘group masturbation and sodomy sessions’ to enter the ‘Illuminati’ thank you very much – I’ll get along on my own self made money, cheers.

            Wouldn’t you?

            I’ll continue with it for a while, I’m 25 mins in, but frankly I think a lot of the ‘details’ are horseshit although the underlying theme/s may have veracity.

          • Ok cooldude, it improves considerably after all the crap about secret societies, I guess that’s just window dressing. Will keep going – 47 mins in now.

          • My point being, I guess I don’t need the secret society angle (or lack thereof) to explain pure human greed.

        • michaelcoughlan

          Hi cooldude,

          Excellent link. From the link;

          “Offshoring greatly increased the inequality in income and wealth in the US. Capital succeeded in looting labour”

          Just like our host has been saying all along the only mainstream economist highlighting this.

          “Anyone or any organization that offers truth to the lies is demonized. Last week the new chief of the US Broadcasting Board of Governors, Andrew Lack, listed the Russian TV Internet service Russia Today as the equivalent of Boko Haram and the Islamic State terrorist groups. This absurd accusation is a prelude to closing down RT in the US”

          God help Max keiser and Stacy Herbert.

          “This shows that corruption can prevail for an indeterminable period”

          Just like Keiser said; they are fooling all the people all the time.

          • michaelcoughlan

            Hi David,

            From cooldude’s link;

            “War, War, War, that is all Washington wants. It enriches the military/security complex, the largest component of the US GNP”

            Since most economists talk through their collective arses about GNP or GDP I said I would put in a comment to show how absurd this type of nonsense is since GDS (Gross domestic spend) it seems is what counts from the link above.

            With this in mind I’d like to ask you a question knowing full well you won’t answer.

            Can you explain the difference between GDS and GDP? My best effort is as follows; At its simplest the scumbags in the US have replaced production (Surplus capital value added) with spend (existing capital consumed) and have carried on regardless.

            Since they are now consuming capital and showing this as a GOOD thing the only way to balance the books and replace the capital consumed is to rob your population through taxes or your neighbouring countries at gunpoint as you pointed out in the case of Spain after the credit collapse when all the stolen south American silver was lent out.

            So to take my story to it’s absurd extreme let me start by telling you about a video I remember from the first gulf war on you tube. It was a video of one of the first of the so called smart bombs which were being used with a TV camera on the nose of the bomb.

            In this case the bomb was dropped in the night and followed down to its target by locating the targets heat source. The TV camera tracked the progress of the bomb. In this case the “target” was mistakenly a meandering camel and the untried technology of the bomb locked on to the wrong heat source with fatal consequences for the unfortunate mammal.

            Truth being stranger than fiction I came across the following article recently when I was trying in vain to find the video;

            http://planetsave.com/2009/08/12/australia-plans-airstrikes-to-kill-650k-camels-in-outback/

            So my question is David; If the Australian Gubernment do indeed launch operation “CAMEL WHACKER” will the money spent be ADDED to the GDP of Australia?

            I don’t LOL (Laugh out Loud) any more David I LLAFH (Laugh like a fucking hyena) just like ACME door gunner. ACME door gunner only managed to mow down 50 water buffaloes which he states were “all certifieeeeed” not to mention the “157 dead goooooks killed”).

            I presume the water buffaloes were certified because the head cases back home could add the money spent on the bullets and the hourly rate for the chopper and crew to the GDP of the US.

            LLAFH!

            Michael.

        • Everyone should read this.

        • What’s even more unbelievable is this: even assuming people are willing to go through obsecene and ridiculous initiation ‘rites’ and ‘ceremonies’ to enter ‘secret societies’ – the fact is most individuals (including myself) think of themselves and their kids first when they have an important economic decision to make which might advance their career or money-making options, or even to ensure survival – all purported allegiances go out the window and number one comes first. To think that anyone would be looking out for 100 other geezers just because of a hooky handshake is ridiculous. As much as I like Tony, I’ll be eating him first before robbing his gold if the shit hits the fan. Food first, gold second. I bet you are a tasty morsel Tony haha.

  18. Gold is Falling in PRICE ……and will go under $1,000 an oz soon.

    • michaelcoughlan

      Yes.

      Paradoxically for as long as qe lasts the markets will continue to inflate meaning the weight of cash will rotate out of metals into equities and bonds. This is why gold can only be used as insurance. Because it has no revenue it has no investment value and will only increase in value when the bubble pops even though it should increase with money printing.

      As stated before the money being printed is going into the stock market and not to business so deflation will result the more they print. It’s not that they are printing its what they do with the extra moola is what counts.

      Michael.

    • Mike Lucey

      Not its not! As of today its up $2.30 LOL

      Lets see what happens when gold is emancipated.

      • michaelcoughlan

        It all depends on the time frame. From september last year its been trending down from $1787/oz to $1285 or so right now. The trend is down. As long as Draghi keeps printing money to give to banks with no intention of lending paradoxically gold will fall.

        Michael.

        • cooldude

          Hi Michael, if you take a longer timeframe it is clear that gold eventually reflects the increase in the money supply. Until 1971 gold was fixed at $35 US an ounce and all other currencies had fixed rates to the dollar so they were all fixed to gold in a roundabout way. Since 1971 the price of gold has gone to a present level of roughly $1300 which gives an annual increase of roughly 8%. The money supply is increasing at over 10% per annum so is in no way overvalued in relation the increase in paper money.

          Don’t forget also that the £US dollar is the strongest currency and is supported both overtly and covertly by the US war machine. Against other weaker currencies the annual increase is more pronounced. The Euro has dropped 25% against gold since November and the Ruble has dropped 40%.

          Also bear in mind that this market is probably the most manipulated market of them all and they are all manipulated. Tony Brogan has given loads of details on this over the years.

          Another factor in it’s favor, along with bitcoin, is that it can’t be “bailed in ” in the next banking crisis which will come. It is also still a form of protection from the deliberate policy of lowering the purchasing power of our currency which all Central Bankers are now very actively engaged in.

          Check bullionvault.com for long term charts in most major currencies. Not pretty.

          • michaelcoughlan

            Hi,

            I agree with you completely. The only point I was trying to make was that gold at the moment may well go down if out of favour when access to all the printed money becomes available. The short term trend is still down.

            I buy coins for storage and invest a small amount with goldmoney. I would love to put ALL what few bob I have with gold but can’t due to volatility and manipulation.

            Land in my view is the ultimate safe haven. 0% increase in supply on earth and NO futures market I know of.

            Thanks for pointing out my badly made point.

            Michael.

    • On what information is your opinion based.
      Gold was the second strongest currency in 2014 and the strongest in 2015 YTD.
      Physical demand is twice the mined annual supply. Where is the extra gold to come from.
      Do you think that the paper market will be able to submerge and distort the real market.
      What will be the effect on demand with the opening of 3 new exchanges that deal in physical gold only. Two in China, one in Singapore and a 4th in Thailand planned shortly.

      Respect
      Fully
      Tony

    • Here are approx gold prices in euros as extracted from a graph

      5 years ago = 780
      1 years ago = 920
      6 months = 955
      2 months = 970
      1 month = 980

      current price = 11.36 Gain over 5 years 45.64% or 8% p.a. compounded.

      I see exactly what you are saying John. Gold is going down. (Or do you mean it is going to go down.)

      • Here are the figures for US $’s Strongest currency in the world.??

        5 year 1061
        1 year 1248
        6 months 1290
        2 months 1215
        1 month 1200
        current 1280\

        gain over 5 years = 20.64% or 3.85% pa compounded.

        • As you can see, gold has exploded in terms of euros. In fact, in just the last two months gold has risen more than 25%. As I understand it, Europeans look at gold differently than we Americans do. They understand it better but look at its price less often. The typical charting in Europe looks mainly at month end closes, if there are huge swings during the month yet the price did not move up or down a lot when the month was finished then “nothing much happened” in their view. Gold has now broken out wildly to the upside and will have two back to back “big” monthly price gains. This will alarm many Europeans who will now become buyers. This is perfectly natural behavior, when your currency is being debased, finding a safe have to protect your purchasing power is what it all boils down to. (This same thing can be said regarding many other currencies, the Canadian dollar, the pound, the yen and so on). I believe the demand for gold (and silver) coming from Europe is about to explode! This demand will not be spurred by “greed”, it will be spurred by the emotions of self preservation. —Bill Holter

          • Mike Lucey

            I agree with fully agree with the last sentence Tony,
            “This demand will not be spurred by “greed”, it will be spurred by the emotions of self preservation”.

            I read some time ago that its a good idea to have 20% of ones wealth in PMs, gold or silver, simply as an insurance policy for when/ if ‘all hell breaks loose’ and you need to buy basics, food, water, fuel, shelter etc.

            Its looks that the Swiss have thought of this market and produced, what they call, Gold Combi Bars. These are blocks of 20 and 50 x 1gram ingots that can be broken off as required.

            It also looks that it would be extremely difficult of counterfeit these because they are so thin.

            http://www.valcambi.com/products-and-metals/combibarTM/au/50-x-1-g/50-x-1-g-gold-combibarTM/

  19. Pat Flannery

    I think the Irish people should pay closer attention to the National Treasury Management Agency http://www.ntma.ie/ That is where the key financial decisions are made, even more than at the Department of Finance or at the Central Bank. In addition all NAMA employees are NTMA employees first.

    But the most disturbing aspect of all this is the culture. NTMA’s website explains:

    “The NTMA is a State body which operates with a commercial remit to provide asset and liability management services to Government. It has evolved from a single function agency managing the National Debt to a manager of a complex portfolio of public assets and liabilities.”

    A commercial remit. Our national finances are being run as a commercial operation not as a public service. The people’s interested is not even mentioned.

    It goes on to explain:

    “The Agency is known as NewERA in performing these functions. The purpose of NewERA is to provide a dedicated centre of corporate finance expertise to Government taking a commercial approach to the oversight of certain State companies.”

    We may be missing the whole point. When they read us on here do they turn to each other and laugh? Do they laugh because we have not got it yet that the whole business of government is being run by commercial appointees in a revolving door arrangement with the big accounting firms and the big banks? Yes, we need reforms but not the type they advocate.

  20. Adelaide

    So the Irish foreign minister says on RTE News that it is not in Ireland’s interest to attend any potential future European Debt-Conference as proposed by the new Greek government.

    So…? So not in our interest to get a potential debt reduction from a potential Debt-Conference? Huh?

    I wish George Carlin were still alive and performing, this stuff is comedy gold.

    • Mike Lucey

      @Adelaide

      I’ve listened to all George’s gigs and still revisit him occasionally on YouTube. I think he summed it up nicely when he said.

      “They want your fucking retirement money. They want it back, so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it. They’ll get it all, sooner or later, because they own this fucking place. It’s a big club, and you ain’t in it. You and I are not in the big club.”

      I’d hate to think that the Irish foreign minister is in the ‘club’ George talks about and not open enough to even consider other clubs.

  21. Adelaide

    ps what more proof does one need to scrap the TV(RTE) license for effrontery to our intelligence when Miriam O’Callaghan considers her gay Leo interview as being the ‘biggest’ of her career. Patients are dying under his stewardship and he distracts the attention to his sexual-orientation with his presstitute Miriam. A cynically nauseating echo-chamber of low standards.

    • SMOKEY

      +1 +1 +1 +1!!!I said the same thing, we got a smokescreen instead of a radical plan to fix the trolley folly, to hundreds of people this week ad nauseum. And now Leo Im so gay Varadkar, wants you to have some risky blood from homosexual men, you cant make it up. She is the classic talking head with saw dust in between her ears. As for George Carlin, you got that right too!

    • If she had any intergrity or self respect she would resign but there’s no way she’s getting off the gravy train.

      I believe her ‘interview’ with a radical Imam was a shambles too but haven’t had a chance to watch it yet. Fuckwit of the highest order.

  22. Pat Flannery

    “presstitute” I must add that to my vocabulary. Great word.

  23. marethman

    “WAKE UP DAVID”
    Germany doesn’t care what Dragi and the rest of them decide to do with the Euro. They have already decided they are leaving it and are finalizing how they will do it legally. Hence Merkel ignoring the sanctions and starting up trade again with the Russians – no doubt under severe pressure from German business community.
    USA is not growing – figures are bogus coming out of there. If it’s growing so much why are all the big retailers closing down, JC Penny et al.

    Watch out for what the Germans, Dutch and Austrians are doing to bolster their standings using the worlds real money – the yellow metal.

    Printing money to add more debt to existing debt is akin to giving an addicted gambler more money to gamble his way out of trouble. It has not and will not ever worked. The EU monetary union experiment is crumbling before us. The Greeks are right and we should be following suit.

  24. The totalitarian one world government will do anything to have you hand over your life for them to control.

    http://usawatchdog.com/

    Climate Change is Global Communist Tyranny-Lord Christopher Monckton

  25. “Simply put, the world runs 100++% on confidence, what will happen to this confidence when it is discovered the gold is gone? This is why I and many others harp so often on supply and demand. The “supply” cannot be there if the demand is truly as high as reported. One or the other must be wrong. In my mind, supply is finite while demand is potentially infinite because central banks can and have printed $ trillions. These $ trillions are all potential demand on supply and making a “call” every single day. May God help us all when this fraud is discovered and confirmed, our lives will be changed forever! This is not about a “bull market” or $1,000 dollar move in gold or a $30 move in silver, this is about the biggest transfer of wealth in all of history and control of “all the marbles”. You must understand this most basic of concepts to understand why you must own as much gold and silver before it is discovered “the gold is long gone”. The truth is really going to hurt! Regards, Bill Holter, Miles Franklin Associate writer

    Is the Gold Really There?
    http://news.goldseek.com/GoldSeek/1422379477.php

  26. shnaffled

    Howdy,

    Great article David! As always,thoroughly thought provoking and your turn of phrase is beyond reach and with every paragraph ,the story unfolds and the skill of an artiist.

    The comments section here was a worthwhile read too i must say. No obnoxious comments like many other blogs i visit.

    I subscribe;)

  27. E. Kavanagh

    I am not at all convinced that lower oil prices works against the US. It hurts US foes more than the US (e.g. Russia, Iran and Venezuela), and it should help the US economy more than it hurts it as most of the economy is aided by cheap oil. The only parts of the economy that are hurt are some of the oil drillers and some of the green energy crowd who rely on high oil prices to be competitive; and these are a small part of the economy.

You must log in to post a comment.
× Hide comments